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If you are engaged in the commercial sale of vehicles, then you need dealership car insurance. Navigating the world of dealership car insurance is much more challenging than purchasing a simple personal-use policy.
The good news is that we have created this comprehensive guide to dealership car insurance. In it, we discuss what types of insurance coverage are available for dealerships. We also provide tips for finding lower dealer car insurance rates and share our recommendations for top providers.
If you are looking for personal-use car insurance, simply use our comparison tool above. All you need to do is enter your zip code and provide some basic information to start getting free quotes from top providers in your area.
Auto Dealership Car Insurance Requirements
Fortunately, car dealerships are not required to individually insure every vehicle on their lots. However, car dealerships are required to maintain specific types of overall coverage policies that protect the vehicles entrusted to the dealership.
The minimum dealership car insurance requirements vary from state to state. A dealership must have varying types of coverage to protect their vehicles both on and off the lot. Due to the fact that a dealership’s vehicles will be frequently used to conduct test drives, dealerships must have specific insurance to protect employees, vehicles, and even prospective customers.
Types of Dealership Car Insurance
As mentioned above, there are many different types of dealership car insurance. Each specific type of coverage plays a unique role in protecting the assets of the company. Some of the primary types of dealership car insurance include:
Commercial General Liability
Commercial General Liabilty (CGL) coverage is designed to protect the dealership from any incidents that may involve customers or non-employees. This coverage includes both casualty and property coverage. It will usually protect the dealership from copyright infringement and other activities that could compromise their bottom line. CGL does this by providing financial coverage for medical and legal costs that may arise from an incident.
Errors and Omissions Insurance
Frequently referred to as E&O, Errors and Omissions Insurance will protect dealerships when they offer advice as part of their normal business operations. The goal of this insurance is to protect the dealership when employees make an error while providing advice to customers. For example, an employee may provide inaccurate information about a vehicle’s capabilities. E&O Insurance covers any suits that may follow as a result of the employee’s error.
Employment Practices Liability Insurance
EPLI is not a specific type of dealership car insurance. Instead, it is designed to insulate the dealership from liability when it comes to employee interactions. Specifically, it protects the dealership from accusations of harassment, retaliation, wrongful termination, discrimination, or other employment issues.
Business Income Insurance
Business Income Insurance is another type of coverage that is non-specific to car dealerships. This coverage protects businesses from the impact of man-made or natural disasters. This insurance provides financial protection to cover expenses that may result from these disasters.
Specifically, Business Income Insurance can help cover damages, payroll, and other unexpected consequences of lost income. There are many variations of this particular type of coverage. You will need to assess the benefits of each variant to find the right protection for your business.
Garagekeepers Liability
Garagekeepers Liability coverage is especially important for full-service dealerships. It is designed to protect businesses from any liability due to damage caused to a customer’s vehicle. For example, if your mechanic accidentally damages a customer’s vehicle while performing a tire rotation, Garagekeepers Liability will cover the cost.
Worker’s Compensation Insurance
Worker’s Compensation Insurance for car dealerships is essentially the same as other types of worker’s comp coverage. It will pay for medical expenses incurred as the result of an on-the-job injury. Workers comp coverage is required for various businesses, including car dealerships.
Dealer Plate Insurance
This type of coverage will protect your dealership from any damage that occurs when customers are test-driving vehicles. It will protect both the driver and vehicles. Your dealership must have Dealer Plate Insurance before allowing customers to test-drive vehicles. Failing to do so can expose your business to serious civil liability suits.
Dealer plates indicate that they are issued to a car dealership. This allows your customers to lawfully drive vehicles that are not registered or insured in a traditional manner.
How Much is Car Insurance for Dealerships?
The cost of dealership car insurance will vary depending on a variety of factors. While dealership car insurance is much more complex than a private auto insurance policy, the basic premise remains the same. Insurance providers will conduct a thorough risk assessment when issuing a quote for a policy.
The primary drivers of dealership car insurance cost include:
- Location
- Dealership size
- Policy limits
- Types of coverage
- History of claims
While all of the above factors will influence your rates, policy limits and types of coverage are the main categories that are within your control. After all, you cannot easily uproot your dealership and move to a new location. Downsizing the business just to reduce insurance costs is also impractical.
The good news is that you can customize your coverage limits and policy types to best suit the needs of your business. You should ensure that you are paying for the ideal amount of coverage. Ditching any types of coverage that you do not need can also help curb costs.
How to Get Lower Dealer Auto Insurance Rates
As noted above, you cannot do much to offset rate increases based on geographical location or business size. However, you can take some proactive measures to get lower rates.
You should begin by providing regular safety training to your employees. By submitting proof of this training to an insurance provider, you may be eligible for discounted rates.
If you want to take extra steps to lower your insurance rates, consider installing a security system with a monitoring service. Insurance companies usually offer discounts because security systems reduce the risk that your business will be the target of criminal activity.
Car Dealership Insurance: FAQ
Which businesses are required to maintain dealership coverage?
Any business that engages in the commercial sales of automobiles needs dealership car insurance. Failing to have this insurance can make your business subject to fines or leave you vulnerable to a civil suit.
Are you insured when test driving a car?
In most cases, if your dealership has dealer plate insurance, then anyone driving dealership vehicles is covered.
Is there a difference between coverage for a new car dealership and a used car dealership?
The cost of coverage depends on several factors, including location and dealership size. If all other factors are identical, then a used dealership may be cheaper to insure because the cost of vehicles is lower on average. However, every dealership is unique, as is the policy for that particular business.
What happens if a potential customer gets in a car accident when test driving a car?
As long as your business has dealership car insurance, damages and medical expenses will be covered by your policy. However, if you are uninsured, the customer and any other involved parties may file suit against you for damages.
