Jeffrey Wade
Dealer's Open Lot Insurance, also known as auto physical damage, physical damage, or fleet coverage, is a type of insurance that provides protection for vehicles owned and held for sale by licensed auto dealerships. It covers the vehicles themselves, including private passenger vehicles, RV units, and other autos in the dealer's inventory. This type of insurance is designed to protect dealerships from financial losses due to damage or theft of their vehicles. The coverage typically includes collision coverage, which pays for damage to a covered vehicle in the event of an accident or collision with another object. The level of coverage and rates depend on the scale of damage risk and the total value of the business's inventory. Dealer's Open Lot Insurance is an essential form of protection for used auto dealers to ensure they are not left financially vulnerable in the event of damage or loss to their vehicles.
| Characteristics | Values |
|---|---|
| Purpose | Protection for vehicles owned and held for sale by licensed auto dealerships |
| Type of Vehicles Covered | Private passenger vehicles (autos, pickups, minivans, SUVs), RV units, demonstrators, service vehicles, motorcycles, trailers, heavy equipment |
| Type of Coverage | Physical damage, collision, comprehensive, false pretense |
| Reporting Requirements | Monthly reporting for inventories valued over $1,000,000; non-reporting requires stating maximum value of inventory during policy term |
| Coinsurance | If inventory is insured for less than 100% of its value, the insurance company will only pay a corresponding percentage of the claim |
| Limit Per Vehicle | Maximum amount insurance company will pay for each vehicle in the event of a loss; may be lower than the value of each vehicle |
| In-Transit Limit | May be too low if a portion of the inventory is off-site |
| Inventory Value | Total value of inventory impacts the level of coverage and rate |
| Lot Security | Fencing, lighting, cameras, and property crime score impact the level of risk |
| Additional Coverage | Garage Keepers, Garage Liability, Commercial Auto, Employee Liability, Tow Truck Insurance, Cargo Towing, Motor Car |
| Availability | Varies by state and insurance company |
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What You'll Learn
Dealer Open Lot Insurance is different from general liability or business property insurance
Dealer Open Lot Insurance, also known as auto physical damage, physical damage, or fleet coverage, is distinct from general liability or business property insurance. While the latter covers damage to property and provides protection against claims arising from professional malpractice, Dealer Open Lot Insurance specifically provides protection for vehicles owned and held for sale by licensed auto dealerships. This includes new, used, demonstrator, and service vehicles, as well as private passenger vehicles such as autos, pickups, minivans, and SUVs.
Dealer Open Lot Insurance is designed to cover the specific risks associated with dealerships, and policies are custom-built to meet their unique needs. This type of insurance ensures that dealerships are protected in the event of damage to their fleet of vehicles, which could result in significant financial losses. By insuring 100% of the value of their inventories, dealerships can avoid coinsurance penalties and ensure they receive full reimbursement for any damages or losses.
One key difference between Dealer Open Lot Insurance and general liability or business property insurance is the requirement for monthly reporting. Dealers are typically required to submit monthly reports detailing the exact dollar value of their vehicle inventory. Failure to submit these reports on time can result in penalties, and the insurance carrier may only pay a percentage of a claimed loss. This monthly reporting is generally used for inventories valued at over $1,000,000.
Dealer Open Lot Insurance also offers collision coverage, which pays for damage to a covered vehicle resulting from a collision with another object or an overturn. Additionally, it provides comprehensive coverage for any cause of loss except collision, and specified causes coverage for events such as fire, lightning, theft, vandalism, or conveyance accidents.
Due to the unique nature of the dealership business, most dealers will combine Dealer Open Lot Insurance with Garage Keepers and Garage Liability insurance to ensure comprehensive protection and fill any gaps in coverage. It is important to consult an expert to navigate the varying approaches of different insurance companies and find the right coverage for your dealership's specific needs.
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Collision coverage
Dealer Open Lot (DOL) insurance provides physical damage coverage for vehicles owned and held for sale by licensed auto dealerships. This includes collision coverage, which pays for damage to a covered vehicle resulting from an overturn or collision with another object. Collision coverage is a critical component of DOL insurance as it protects dealerships from financial losses due to accidents involving their inventory.
DOL insurance is specifically designed for auto dealerships, addressing their unique risks and exposures. It covers a range of vehicles in a dealer's inventory, including private passenger vehicles, SUVs, RV units, and even motorcycles, trailers, and heavy equipment. The coverage typically extends to used, new, demonstrator, and service vehicles.
The level of collision coverage and the corresponding rates vary depending on the scale of damage risk and the total value of the dealership's inventory. It is crucial for dealerships to assess their inventory's value and select appropriate coverage limits to avoid coinsurance penalties. Under-insuring the inventory may result in the insurance company paying only a prorated amount of the claim, as they typically require dealers to insure 100% of their inventory's value.
Additionally, dealerships should be mindful of the per-vehicle limit, which is the maximum amount the insurance company will pay for each vehicle in case of a loss. This limit may be lower than the value of the vehicles, so it is essential to review and ensure sufficient coverage. Dealerships should also consider the in-transit limit if they have vehicles stored off-site.
In summary, collision coverage under Dealer Open Lot insurance is a vital safeguard for auto dealerships, protecting them from financial losses due to collisions or overturns involving their vehicles. By understanding the specifics of collision coverage and selecting appropriate coverage limits, dealerships can effectively manage their risk exposure and ensure they are adequately protected in the event of accidents.
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Monthly reporting requirements
Dealers Open Lot (DOL) insurance provides auto physical damage coverage for a fleet of vehicles owned by a licensed auto dealer. Monthly reporting is typically used to insure inventories valued at more than $1,000,000. Monthly reporting requires the dealer to send the insurance carrier a monthly report with the exact dollar value of the vehicle inventory. Severe penalties may be incurred if the dealer fails to submit these reports on time. For example, after the first report is not received, the carrier will typically only pay 75% of a claimed loss, regardless of the limit on the declarations page.
Monthly reporting is one of two common methods of establishing inventory values for Dealers' Open Lot Coverage. The other method is non-reporting, which requires the dealer to state the maximum value of the inventory on the premises during the policy term. This option requires the dealer to pick the value of the inventory at its highest peak to avoid a coinsurance penalty.
The level of coverage and the rate depend on the scale of damage risk as well as the total value of a business's inventory. A rule of thumb to determine the adequate policy DOL limit is to multiply the average number of units on the lot by the average value per unit. It is important to identify the maximum value per unit limit needed on the policy as well.
Most carriers only offer the maximum value option, but when available, the Reporting Form offers more flexibility. The Reporting Form bases the coverage off the average value of inventory over a twelve-month period.
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Non-reporting requirements
Dealer's Open Lot Insurance (DOL) provides physical damage insurance for dealerships' inventory. This includes comprehensive and collision coverage for vehicles held for sale by the dealership. This type of insurance is not a requirement by the state, and it does not have any non-reporting requirements. However, there are some essential aspects to consider regarding the reporting of inventory value and coverage limits:
Firstly, dealerships must ensure they insure their inventory for the correct value. Failure to do so could result in penalties during a claim. For example, if a dealership has $200,000 worth of inventory but only insures it for $100,000, the insurance company will only pay a corresponding percentage of the claim. In this case, they would only cover 50% of the loss, minus the deductible.
Secondly, the level of coverage and rate depend on the total value of a business's inventory. A rule of thumb is to multiply the average number of units on the lot by the average value per unit to determine the adequate policy limit. Dealerships with inventories larger than $1,000,000 may need to report their inventory value to the insurer each month. This is to ensure that the coverage amount is sufficient and to avoid coinsurance penalties.
Thirdly, dealerships should be aware of the per-vehicle limit, which is the maximum amount the insurance company will pay for each vehicle in the event of a loss. This limit may be much lower than the value of each vehicle, so it is crucial to examine this value and ensure it is appropriate for the dealership's needs.
Additionally, most carriers require that all test drives are accompanied by a salesperson, and no overnight test drives are allowed. Employees and family members who drive the vehicles for personal use must be scheduled and rated on the policy to avoid claim denials.
Finally, DOL coverage is not limited to private passenger vehicles. It can be extended to include other types of vehicles, such as trailers, motorcycles, and heavy equipment, if the insurance carrier agrees to cover vehicles "other than autos."
In summary, while there are no explicit non-reporting requirements for Dealer's Open Lot Insurance, dealerships must carefully consider and report their inventory value and ensure they understand the coverage limits and requirements to avoid penalties and insufficient coverage in the event of a claim.
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False pretense coverage
The level and range of coverage provided by false pretense coverage depend on the specific policy. It is important for agents to work closely with their clients to determine the appropriate coverage option. False pretense coverage can be written monoline or packaged with the dealer's garage liability coverages.
Dealers should be aware of the potential for coinsurance penalties when insuring their inventories. Insurance companies generally require dealers to insure 100% of the value of their inventories. If a dealer insures less than this, the insurance company will only pay a corresponding percentage of the claim. For example, if a dealer has an inventory valued at $200,000 but only insures it for $100,000, the insurance company will only pay 50% of the claim.
To avoid coinsurance penalties, dealers must ensure that the limit per vehicle, which is the maximum amount the insurance company will pay for each vehicle in the event of a loss, is high enough to cover potential losses. The standard per-vehicle limit on the policy may be lower than the value of each vehicle, so it is important to examine this value carefully.
Additionally, dealers should consider the in-transit limit, especially if they have a portion of their inventory off-site. Even when 100% of the inventory value is covered, the limit per vehicle still applies. In recent years, insurance carriers have faced significant losses due to floods and hurricanes, leading to closer control of coverage. Dealers should work with their insurance representatives to review Specified Causes coverage and ensure they have adequate protection.
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Frequently asked questions
Dealer open lot insurance, also known as auto physical damage, physical damage, or fleet coverage, is an insurance policy that provides protection for vehicles owned and held for sale by licensed auto dealerships.
Dealer open lot insurance covers physical damage to a fleet of vehicles. This includes collision coverage, which pays for damage to a covered vehicle in the event of an overturn or collision with another object. It also covers damage caused by fire, explosions, and weather events such as flooding, hail, and earthquakes
Dealer open lot insurance is essential for used auto dealers with a fleet of vehicles. It is designed to protect dealerships from financial losses due to damage or loss of their vehicles.
The level of coverage and rate depend on the scale of damage risk as well as the total value of the dealer's inventory. Dealers are required to insure 100% of the value of their inventory, and the coverage amount is set at this value. The limit per vehicle, which is the maximum amount the insurance company will pay for each vehicle in the event of a loss, should be high enough to avoid excessive loss when making a claim.
