Auto Dealers Insurance Policy Information
Auto Dealers Insurance. Owning and operating an auto dealership can be an exciting - and lucrative - business venture. However, despite the excitement there is to be had and the money there is to be made, being the proprietor of an auto dealership does come with a lot of responsibilities and risks.
You are tasked with managing an expensive inventory, keeping your dealership in good condition, maintaining the safety of your workplace, and ensuring that your customers are satisfied; and those are just a few of the responsibilities that are on your shoulders. Needless to say, running a car dealership can be quite demanding.
Automobile dealers sell new and/or used vehicles and generally provide a variety of services such as financing and insurance for vehicle purchasers. Most sell auto parts and accessories, provide auto repair and body work, and offer vehicle rental and leasing.
Some provide towing services, car washing, or the sales and service of recreational vehicles. Some loan vehicles to customers while their vehicles are being repaired.
Most dealerships purchase new cars directly from manufacturers, financing the purchase through arrangements with either the manufacturer or a bank. Used vehicles are obtained as trade-ins from customers purchasing newer vehicles, or from automobile auctions.
While a selection of vehicles may be displayed in a showroom, most are stored in open lots outside the building.
Some dealerships provide "courtesy cars" to athletic organizations, celebrities, or universities, or for high-profile special events.
Despite your best efforts to make sure that everything runs as smoothly as possible, there's always a chance that something can go wrong. In order to protect yourself from the unexpected, How do you do that? By making sure you have the right type of auto dealers insurance coverage.
Why is insurance for car dealerships so important? What type of coverage do you need? Read on to find the answers to these questions and more.
Auto dealers insurance protects your car dealership from lawsuits with rates as low as $67/mo. Get a fast quote and your certificate of insurance now.
Below are some answers to commonly asked car dealership insurance questions:
- What Is Auto Dealers Insurance?
- How Much Does Auto Dealers Insurance Cost?
- Why Do Auto Dealers Need Insurance?
- What Type Of Insurance Do Auto Dealers Need?
- What Does Auto Dealers Insurance Cover & Pay For?
What Is Auto Dealers Insurance?
Auto Dealers Insurance is a type of insurance coverage designed specifically for automobile dealerships to protect them against financial losses due to various risks such as theft, damage, or liability claims. It typically includes liability coverage, property coverage, business interruption coverage, and coverage for vehicles in inventory.
How Much Does Auto Dealers Insurance Cost?
The average price of a standard $1,000,000/$2,000,000 General Liability Insurance policy for small car dealerships ranges from $67 to $89 per month based on location, revenues, services offered, claims history and more.
Why Do Auto Dealers Need Insurance?
As with any business, owning and operating an auto dealership comes with several different risks. Also just like any business, as the owner and operator of the establishment, you are responsible for anything that goes wrong.
If someone were to break into your car dealership and vandalize or steal any of your inventory, if your dealership were to experience storm-related damage, if an employee were to sustain an injury while working, or if a customer were to file a lawsuit against you citing that your dealership damaged their vehicle while it was in your care, you would be held liable.
As you can image, the costs that are associated with replacing or repairing damaged or stolen property, medical care, and legal fees can be exorbitant. If you had to pay any of those types of expenses yourself, there's a good chance that you would end up in serious financial trouble.
That's why making sure that you are properly insured is so important; if you're insured, instead of having to pay for the expenses that are associated with anything that goes wrong, your insurer will cover them for you.
In addition to protecting you from serious financial losses, car dealerships are legally required to carry auto dealers insurance. If you don't have compulsory coverages, you could end up being hit by stiff fines; plus, there's a chance that you could end up losing your business.
What Type Of Insurance Do Auto Dealers Need?
There are several kinds of auto dealers insurance coverage that car dealerships should carry. The specific type of coverage you'll need is dependent on several factors; what town your dealership is located in, the size of your dealership, and the type of inventory you carry, for example.
In order to make sure that you are properly protected, speaking to a reputable agent who specializes in auto dealership insurance is highly recommended. An experienced agent will be able to assist you with getting the coverage you need to make sure that your auto dealership, your clients, your employees - and you - are well-protected.
Some of the most basic coverages that car dealers will need to carry include:
- Commercial General Liability: This coverage protects you from third-party property damage and personal injury liability claims. For instance, if a customer were to trip in a pot hole while walking through your lot, break a bone, and file a lawsuit against your dealership, commercial general liability insurance will help to cover any associated expenses.
- Commercial Property: With business property insurance, the buildings on your dealership, as well as the contents that are inside of them, will be protected from certain perils; fires, pipe bursts, some types of storm damage, vandalism, and theft, for example. If a fire were to break out in your dealership, this policy would help to cover the cost of repairing or replacing anything that was damaged.
- Workers' Compensation: This coverage will cover work-related injuries or illnesses that your employee may be impacted by. If an employee were to slip on a wet floor and break a bone, workers comp coverage would pay for their medical care and replace any wages they may lose if they are unable to work while recovering.
The above-mentioned policies are just a few examples of the type of auto dealers insurance coverage you should consider for your dealership.
Car Dealerships' Risks & Exposures
Auto dealers liability exposure is high due to the number of visitors to the premises. To prevent slips and falls, floor coverings inside the showroom should be in good condition with no frayed or worn spots on carpet and no cracks or holes in flooring. Steps and uneven floor surfaces should be prominently marked.
Sufficient exits must be provided and be well marked, with backup lighting systems in case of power failure. Waiting areas should be provided for customers whose vehicles are being repaired. Customers should not be permitted access to the service area.
Parking lots and sidewalks need to be in good repair with snow and ice removed, and generally level and free of exposure to slips and falls. If the premises is open after dark, there should be adequate lighting and appropriate security.
There should be a disaster plan in place for unexpected emergencies. Vehicles in open lots can pose an attractive nuisance. Chains and fences should be in place to prevent entrance to the dealership after hours.
Personal injury exposures include allegations of discrimination, false arrest or detention, unauthorized or intrusive searches, or wrongful ejection from the premises.
Repair operations and sales of used vehicles are the major products/completed operations exposures. Compliance with all manufacturers' instructions is critical. There should be a check-off procedure in place prior to the sale or release of vehicles to the customer to prevent its return with any vital functions not working properly.
Commercial automobile exposure is high due to employees driving demonstrator models and customers taking vehicles for test drives. All employee drivers should have valid licenses with their MVRs regularly checked. All vehicles must be regularly maintained with records retained.
There should be written procedures for personal and permissive use of vehicles furnished to employees. A set procedure must be in place for test drives, such as requiring salespersons to accompany the customers. In order to prevent the conversion of the vehicles, driver's licenses and other forms of identification should be verified in advance of the customer removing the vehicle from the premises.
If the dealership provides "courtesy cars" to athletic organizations, celebrities, or universities, or for high-profile special events, the exposure increases due to the lack of control over the drivers.
Towing presents a more serious exposure due to the potential for damage to the vehicles towed. All tow truck drivers must be experienced. Towing vehicles must be regularly checked, in particular, the hoists and tow bars.
If vehicles are rented to customers, the dealership should keep a copy of the renter's driver's license and proof of insurance. The rental contract should identify all drivers and state that unlisted, unlicensed, or minor drivers are not permitted to operate the vehicle.
It should also include a hold-harmless agreement in which renters agree to assume responsibility for the operation of the vehicle to limit the business's exposure to vicarious liability only. If a collision damage waiver is offered, the customer's signature is needed to document whether this was purchased or declined.
The customer should also be required to sign a pre-inspection form to minimize disputes when the vehicle is returned with damages.
Garagekeepers exposure is from damage that can occur to customers' vehicles left with the dealership for servicing or repairs. Keys to customer's vehicles should be kept in a locked box to prevent unauthorized use. Proper identification should be required to prevent handing a customer's car to the wrong owner.
Environmental impairment exposures can be significant due to the storage of fuel in underground fuel tanks and the disposal of used oils, solvents and other hazardous wastes from service and repair operations. All tanks and pipes, underground or above, must meet state or federal regulations and be routinely tested for leakage.
Spillage and leaking of pollutants into the air, ground, or water can result in high cleanup costs and fines. Spill procedures must be in place to prevent the accidental discharge of sludge from water reclamation systems used in washing vehicles.
Contracts should be in place to dispose of all environmentally dangerous chemicals. If there are underground storage tanks, a UST policy will be needed.
Workers compensation exposure is moderate from repair and maintenance activities on vehicles. Employees performing maintenance or repair work on customers' vehicles should be properly trained. Employees can incur injuries from slips, falls, back sprains, strains and hernias, hearing impairment from noise, and foreign objects in the eye.
Welders may suffer burns. Repair areas should be properly ventilated. Proper safety equipment is required. Hoists need to be regularly inspected to prevent vehicles from falling off. The proper use of lifting techniques and of dollies should be encouraged.
Refueling should be done only in well-ventilated areas to minimize inhaling of fumes. Information regarding chemicals should be available to employees along with early warning signs of problems. Test drives, pickup, and delivery of customers or vehicles can result in employee injury due to vehicular accidents.
Property exposure is high due to flammable fuels, paints, lubricants, oils, degreasers, and solvents used in the repair operations. These must be properly labeled, separated, and stored away from combustibles. Spray painting should be done in spray booths with good ventilation, UL-approved wiring and fixtures, and adequate controls.
Welding is often a part of the repair and body work operation that needs to be evaluated for proper handling of the tanks and gases. It should be done away from the other operations with either a separate room or flash/welding curtains. Smoking should be prohibited. Poor housekeeping is a serious fire hazard. Unless stored and disposed of properly, oily rags can spontaneously combust and cause a fire.
Work areas must be cleaned regularly and trash removed from the building. Vehicles and auto parts are target items for thieves. Appropriate security controls must be taken including physical barriers such as chains, fences, or gates, lighting to deter access to the premises after hours, and an alarm system that reports directly to a central station or the police department.
Business income and extra expense exposures are high as replacement facilities may not be readily available.
Inland marine exposures are from accounts receivable if the dealership offers credit, computers used to monitor inventory, floor plan coverage for vehicles furnished by manufacturers and held for sale, goods in transit, signs, and valuable papers and records for manufacturers', parts suppliers', and customers' information.
Backup copies of all records, including computer records, should be made and stored off premises. Vehicles stored in open lots are particularly susceptible to damage by hail, wind, flood, vandalism, and theft.
Lots should be well lighted with chains, fences or gates to prevent access and transport. The more expensive models should be moved inside to the showroom. An alarm system that reports directly to a central station or the police department should be used. Security guards may be appropriate in some areas.
Crime exposures are from employee dishonesty, forgery or alteration, theft of money and securities, computer fraud, money orders, and counterfeit paper currency. Background checks, including criminal history, should be performed on all employees handling money.
Auto dealers' operations involve a number of transactions and accounts that can be manipulated. There must be a separation of duties between persons handling deposits, billing, ordering, disbursements, and reconciling bank statements.
Physical audits should be conducted at least annually. Theft of money and securities prevention requires controls of monies kept in the cash drawers and regular bank drops.
What Does Auto Dealers Insurance Cover & Pay For?
Auto dealers may face lawsuits for various reasons, including:
Selling defective vehicles: If an auto dealer sells a vehicle with defects that the buyer was not aware of, the buyer can sue the dealer for misrepresentation, breach of warranty, or fraud. Insurance can help protect dealers from such lawsuits by covering the cost of legal fees, settlements, or judgments.
False advertising: Auto dealers may be sued for false advertising if they make misleading statements about their vehicles, such as fuel efficiency or safety features. Insurance can help cover the cost of legal fees, settlements, or judgments related to such lawsuits.
Discrimination: Auto dealers may face lawsuits for discrimination, such as denying credit or employment based on race, gender, or other protected characteristics. Insurance can provide coverage for legal fees, settlements, or judgments related to such lawsuits.
Breach of contract: Auto dealers may be sued for breach of contract if they fail to fulfill their obligations under a sales or service contract. Insurance can help cover the cost of legal fees, settlements, or judgments related to such lawsuits.
Personal injury or property damage: Auto dealers may be held liable for injuries or property damage caused by their vehicles, such as in accidents resulting from mechanical defects or negligence. Insurance can provide coverage for the cost of legal fees, settlements, or judgments related to such lawsuits.
In general, auto dealer insurance policies may provide coverage for a range of risks, including general liability, errors and omissions, product liability, and garage liability. The specific coverage and limits of an insurance policy will depend on the type and size of the dealership, as well as other factors.
When a lawsuit is filed against an auto dealer, the dealer can file a claim with their insurance company to request coverage for the legal costs and damages associated with the lawsuit, subject to the terms and conditions of their policy.
Commercial Insurance And Business Industry Classification
- SIC CODE: 5511 Motor Vehicle Dealers (New And Used)
- NAICS CODE: 441110 New Car Dealers, 441120 Used Car Dealers
- Suggested ISO General Liability Code(s):
- Suggested Workers Compensation Code(s): 8380 Automobile - Service or Repair Center & Drivers, 8748 Automobile - Salespersons
Description for 5511: Motor Vehicle Dealers (New And Used)
Division G: Retail Trade | Major Group 55: Automotive Dealers And Gasoline Service Stations | Industry Group 551: Motor Vehicle Dealers (New And Used)
5511 Motor Vehicle Dealers (New And Used): Establishments primarily engaged in the retail sale of new automobiles or new and used automobiles. These establishments frequently maintain repair departments and carry stocks of replacement parts, tires, batteries, and automotive accessories. These establishments also frequently sell pickups and vans at retail.
- Automobile agencies (dealers)-retail
- Automobiles, new and used-retail
- Cars, new and used-retail
- Motor vehicle dealers, new and used cars-retail
- Pickups and vans, new and used-retail
Auto Dealers Insurance - The Bottom Line
To find out more about the type of auto dealers insurance policies you'll need, how much coverage your dealership needs - speak with an experienced insurance broker who is experienced with the unique risks of car dealers.
Additional Resources For Auto Service & Repair Insurance
Read useful small business auto service and repair insurance policy information. In an aotu related business, you need to have the right type of commercial insurance coverage so that your garage, employees, and customers vehices & other property is protected.
- Auto Dealers
- Auto Detailing & Mobile Car Wash
- Auto Dismantlers
- Auto Garage
- Auto Glass Repair Shops
- Auto Paint Shops
- Auto Service Repair
- Auto Supply Parts Store
- Car Rental
- Car Wash
- Gas Station
- Motorcycle Dealers
- Parking Lot
- RV Dealers
- Snowmobile Dealers
- Truck Rental
- Used Car Dealer
The auto service and repair industry is an essential part of the transportation sector, responsible for maintaining and repairing vehicles to keep them running smoothly and safely. However, this industry also comes with inherent risks and liabilities, which is why commercial insurance is necessary to protect both the business and its employees.
First and foremost, the auto service and repair industry deals with hazardous materials and equipment on a daily basis. There is a risk of accidents and injuries occurring in the workshop, and insurance can provide financial protection in the event of a workplace accident or injury.
Additionally, the auto service and repair industry is subject to the risk of property damage. There is a potential for damage to vehicles in the workshop, as well as damage to the business' own property, such as tools and equipment. Business insurance can cover the costs of repair or replacement in the event of such damage.
Furthermore, the auto service and repair industry is vulnerable to liability claims from customers. If a customer's vehicle is not repaired properly, it can result in further damage or accidents on the road, leading to liability claims against the business. Insurance can provide coverage for these types of claims, protecting the business from financial loss.
In conclusion, the auto service and repair industry needs commercial insurance to protect against the risks and liabilities inherent in this line of work. Without insurance, businesses in this industry would be vulnerable to financial loss and legal action, which could ultimately lead to their failure.
Minimum recommended small business insurance coverage: Building, Business Personal Property, Business Income, Equipment Breakdown, Employee Dishonesty, Money and Securities, Accounts Receivable, Computers, Signs, Valuable Papers and Records, General Liability, Employee Benefits, Environmental Impairment, Underground Storage Tank Liability, Umbrella, Hired and Non-owned Auto & Workers Compensation.
Other commercial insurance policies to consider: Earthquake, Flood, Computer Fraud, Forgery, Goods in Transit, Cyber Liability, Employment-related Practices, Business Automobile Liability and Physical Damage, Garagekeepers and Stop Gap Liability.