Test Drive Insurance: Understanding Dealership Policies

If you're buying a car from a dealership, you're usually covered by the dealer's insurance when test driving a car. Dealerships are required by law to insure their cars, which means they should have a blanket policy that pays for damage if a customer is driving the vehicle. This type of policy is called garage liability insurance. This means that you don't need to have your own insurance to test drive a car at the dealership, but there are a few good reasons you may want to have insurance in place.

Dealerships are legally required to insure their inventory

The dealership insurance industry often places several obstacles on seemingly straightforward claims payments. For example, the Dealers Open Lot market is limited, consisting of four to five insurers (outside of floorplan carriers) that are considered potential players. If your dealership is in a catastrophe-prone area, the market might be even smaller. With any restricted market, insurance carriers have the leverage, and you can expect deductibles to increase and the availability of weather aggregates to decrease.

It is also worth noting that dealerships are not always legally required to insure their inventory. In some cases, the responsibility for insuring a vehicle during a test drive may fall on the individual taking the car for a test drive. This is why it is important to always check with the dealership beforehand to ensure that you are covered by their insurance in the event of an accident.

If you are unsure about the dealership's insurance coverage, you can consider buying non-owner auto insurance or temporary auto insurance to cover yourself during the test drive. This will protect you from liability if you cause an accident while driving a dealership car, which is considered a borrowed vehicle. Temporary insurance coverage can last anywhere from one hour to six months and is a convenient way to get insured while test-driving a vehicle.

Garage liability insurance covers accidents during test drives

Garage liability insurance is a type of insurance that covers auto dealerships and other businesses in the automotive industry. It is designed to protect dealerships from property damage and bodily injury resulting from their operations. This includes accidents that occur during test drives.

When you test drive a car at a dealership, you are typically covered by the dealership's insurance. Dealerships are required by law to insure their vehicles, and this insurance usually takes the form of a blanket policy that covers accidents and damage to their cars during test drives. This type of insurance is known as garage liability insurance. It is a specialty insurance targeted specifically at the automotive industry, including new and used car dealerships.

Garage liability insurance acts as an umbrella policy that adds a layer of protection to the dealership's general liability policy. It covers bodily injury and property damage resulting from direct garage operations, which are not usually covered under commercial or business liability insurance. This type of insurance also typically covers the dealership's employees and customers.

While garage liability insurance covers accidents during test drives, it is important to note that it does not cover damage to customer cars on-site for service. It also does not cover vandalism, stolen vehicles, or damage from events such as hail. Additionally, the dealership may still hold you liable for damages depending on the cause of the accident, such as reckless driving. In such cases, the dealership may initially pay for repairs but then seek to recoup the costs from you or your insurance company.

Dealers may ask for proof of insurance before a test drive

However, it is important to note that there may be some instances where a dealership could hold you liable for damages. For example, if you are driving recklessly and cause an accident, the dealer might try to collect repair costs from you or your insurer. In some cases, dealerships may also ask you to sign a "loaner/demo" agreement, accepting liability for any damages during the test drive. Therefore, it is always a good idea to have your own insurance coverage before test-driving a vehicle.

Additionally, requirements for test drives may vary between dealerships and states, so it is essential to check with the specific dealership beforehand. While insurance is typically not required for a test drive, it is usually needed to purchase the car. Before taking ownership and driving the vehicle off the lot, you will likely need to show proof of insurance.

You may be liable for damages if you cause an accident during a test drive

If you cause an accident during a test drive, you may be held liable for damages. This is because insurance follows the driver, not the car. In this case, your insurance would be liable for any losses resulting from the accident. If you don't have insurance, you may be personally liable for the damages.

However, it's important to note that dealership insurance typically covers test drives, and you may be covered under their policy. Dealerships are required by law to insure their cars, and they usually have a blanket policy that pays for damage if a customer is driving the vehicle. This insurance is usually the primary coverage in the event of a claim.

Additionally, some dealerships may ask you to sign a "loaner/demo" agreement or a liability waiver before a test drive. By signing this document, you accept responsibility for any damages caused during the test drive. In this case, you would likely be held liable even if you have your own insurance policy.

To avoid liability issues, it's essential to clarify your insurance coverage before taking a car for a test drive. Verify that you are covered under the dealership's insurance policy and understand any conditions or limitations. If in doubt, consider purchasing separate insurance, such as non-owner auto insurance or temporary auto insurance, to cover you during the test drive.

Private sellers should have insurance to cover injuries during a test drive

When it comes to test-driving a car, it's important to understand the insurance implications, especially if you're considering buying from a private seller. Private sellers should have insurance to cover injuries during a test drive, and here's why:

First and foremost, it's crucial to recognize that test driving a vehicle is an essential step in the car-buying process. It allows you to get a feel for the car, assess its performance, and make an informed purchase decision. However, test driving also comes with certain risks, including the possibility of accidents and injuries. Therefore, ensuring that you have adequate insurance coverage is of utmost importance.

When test-driving a car from a dealership, you are typically covered by their insurance, which is legally required. Dealerships have what is called "garage liability insurance," which covers accidents, damage, and personal injuries that may occur during test drives. This insurance is specifically designed for commercial sellers, including new and used car dealers, and it extends to both customers and employees. So, if something unexpected happens during a test drive at a dealership, their insurance will usually take care of it.

Now, when it comes to private sellers, the situation is a bit different. Private sellers should also have insurance that covers injuries during a test drive. While their insurance typically covers their vehicle, it is essential to confirm this before taking the car for a spin. Ask the owner to provide a signed statement confirming that you have permission to drive the car, that the vehicle is insured, and that you are not responsible for any insurance deductible in case of an accident. This is important because, in the event of an accident, you could be held liable for injuries sustained by yourself or others.

Even though private sellers' insurance should cover injuries, it's always a good idea to have your own insurance as well. This will provide you with additional peace of mind and protect you in case the private seller's insurance has limitations or gaps in coverage. By having your own insurance, you reduce the risk of being left financially responsible for any injuries that may occur during the test drive.

In summary, private sellers should have insurance to cover injuries during a test drive, and as a potential buyer, it is your responsibility to confirm this coverage before getting behind the wheel. By doing so, you protect yourself and ensure that any injuries resulting from a test drive are properly covered by insurance.

Frequently asked questions