Dealerships: What Insurance Coverage?

Car dealerships need insurance coverage for their vehicles, but this differs from personal car insurance. Dealerships are not required to insure each car on their lot individually. Instead, they must maintain overall coverage policies for their inventory as part of their commercial property insurance. This includes dealer's open lot insurance, garage keeper's insurance, and garage liability insurance. Dealerships should also carry business and liability insurance to protect their business and employees.

Commercial General Liability Insurance

General liability insurance covers customer injury, customer property damage, and advertising injury. For example, if a customer slips and falls in your dealership and decides to sue, general liability insurance can cover their medical expenses and funeral expenses in fatal incidents, as well as legal expenses. It also covers damage to a customer's property, such as a vehicle, while in your possession. For instance, if a customer's car mirror is broken while in your care.

Additionally, general liability insurance protects your dealership from the financial burden of losing critical electronic data, such as inventory, sales data, employee contracts, and customer financing information. It also covers advertising injuries, including defamation, libel, slander, and copyright infringement.

Small automotive businesses may be able to bundle general liability insurance with commercial property insurance in a Business Owner's Policy (BOP). A BOP typically costs less than purchasing each policy separately and is suitable for businesses with specific characteristics, such as having fewer than 100 employees, a small office or shop, and annual revenue below $1 million.

The cost of commercial auto dealer insurance depends on various factors, including the size of the dealership, its location, the specific risks involved, and the chosen coverage amounts and deductibles. By bundling different types of auto dealer insurance, dealerships can often save on costs.

Commercial Property Insurance

For example, if a dealership experiences a fire, commercial property insurance can help cover the costs of repairing or replacing damaged buildings and equipment. It can also protect dealerships from financial losses due to business interruptions caused by such incidents. This type of insurance is designed to safeguard the dealership's property and ensure that they can continue operating even after unexpected events.

Additionally, commercial property insurance can provide coverage for outdoor assets, such as vehicles in the dealership's inventory, and indoor assets like office furniture and décor. It can also protect against financial losses due to business interruptions caused by covered events. This type of insurance ensures that dealerships can recover from incidents like fires, theft, or vandalism without incurring significant financial losses.

The cost of commercial property insurance for car dealerships can vary depending on various factors, including the size of the dealership, its location, the value of the property being insured, and the specific risks associated with the business. Dealership owners can work with insurance providers to assess their unique needs and determine the appropriate level of coverage for their business.

By investing in commercial property insurance, car dealerships can protect their assets, minimize financial risks, and ensure they can continue serving their customers even in the face of unexpected challenges. This type of insurance provides a safety net that allows dealerships to focus on their operations and growth while having peace of mind that their property is protected.

Dealer's Open Lot Insurance

Dealers Open Lot Insurance is a type of insurance that covers vehicles on a car dealership's lot that are for sale. This includes vehicles that are damaged in a wreck or collision, whether they are being driven by an employee or a customer on a test drive. This insurance will also cover the dealership's losses in certain cases of theft.

Dealers Open Lot Insurance is essential for used auto dealers. Without it, dealerships could be liable for large losses if their vehicles are damaged. The insurance provides auto physical damage coverage on a fleet of vehicles owned by a licensed auto dealer. These policies are designed with dealers in mind and are equipped to handle their specific risks.

The coverage is not exclusive to the lot itself or just for private passenger vehicles. Vehicles can be covered for personal use if the policy has scheduled furnished drivers. Coverage applies while the dealer is doing repairs, during accompanied test drives, while transporting the vehicles from an auction, or while the vehicles are parked on the sales lot. Coverage can be extended for vehicles other than private passenger vehicles, such as trailers, motorcycles, heavy equipment, or other types of vehicles held for sale, if the carrier agrees.

The exact specifications of the coverage depend on the policy. Agents must work closely with clients to create a policy that fits their unique needs. 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 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. The level of risk is based on a variety of factors, including the security of the property, geography, population density, and the types of vehicles sold.

There are four basic levels of protection for open lot coverage: unprotected lots, nonstandard protection, standard protection, and building protection. Unprotected lots have no fencing or barriers against theft protection, while nonstandard protection offers some level of protection but does not cover the entire inventory. Standard protection means the entire inventory is covered and protected, and building protection means the inventory is always inside a building.

Garage Keeper's Insurance

Garage Keepers Insurance is a type of insurance that car dealerships take out to protect their customers' vehicles from damage or theft while they are in their care. This type of insurance is also known as ""storage location insurance"" and is typically purchased as an add-on to an existing garage liability policy.

Garage Keepers Insurance covers a customer's vehicle while it is being stored or serviced by the dealership. This includes situations where a vehicle is left overnight in a covered location or is being test-driven by an employee. The insurance covers damage caused by fire, theft, vandalism, extreme weather, and collision.

There are several types of Garage Keepers Insurance coverage:

• Legal liability coverage: This is the most common type of Garage Keepers Insurance. It covers losses when an employee is legally liable for damage to a customer's vehicle, whether due to negligence or mistake.
• Per-occurrence limit: This is the total amount of coverage provided for all vehicles under the policy that are stolen or damaged in a single incident.
• Per-vehicle deductible: This is the amount the dealership pays out-of-pocket for each vehicle impacted by an event before the insurance coverage kicks in.
• Direct primary coverage: This protects a customer's vehicle if it is damaged or stolen, regardless of who is at fault.
• Direct excess coverage: This is a cheaper alternative to direct primary coverage. It acts as secondary coverage, covering losses that exceed a customer's personal auto insurance.

Garage Keepers Insurance is essential for dealerships and other businesses that regularly take custody of customer vehicles, such as service stations, auto repair shops, and parking garages. It helps reduce their risk exposure and provides financial protection in the event of unexpected damages or losses.

Garage Liability Insurance

The cost of Garage Liability Insurance can vary depending on several factors, including the state in which the dealership is located and the coverage amount needed. For instance, in Georgia, the state requirement for Garage Liability Insurance is $125,000. However, this may not be sufficient to cover all potential losses, and dealerships may want to consider purchasing higher coverage amounts to ensure they are adequately protected.

Frequently asked questions