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What Insurance does an Auto Dealer Need?

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What is Auto Dealer Insurance?

Most auto dealers hold a lot of expensive inventory on their lots, right? Property damage or vandalism to a car on your property can cost you significantly. That's where auto dealer insurance comes into play. This coverage is typically a combination of different insurance options—such as general liability, property insurance, and business interruption coverage—that is used to protect auto dealers. 

Who Needs Auto Dealer Insurance?

What types of businesses need this insurance coverage?

  • Used Car Dealerships
  • Motorcycle Dealers
  • Used car and truck dealers
  • Recreational Vehicle Dealers
  • Boat Dealerships
  • Trailer Dealers
  • Auto Repair Shops
  • Farm Equipment Dealers
  • Car rental businesses

Anyone who has a fleet of vehicles may want to look into this coverage for their business.

What Dealer Insurance Coverage Should Include

For proper risk management, these are some of the insurance solutions auto dealers should consider for protection for your business.

General Liability Insurance

General liability insurance is the most basic policy that every dealership needs as a foundation to protect its business. General liability coverage will pay for claims of third-party bodily injury, third-party property damage, libel and or/slander, and copyright infringement. It covers necessary medical costs, repair or replacement of damaged property, and legal costs and settlements. 

Commercial Property Insurance

A commercial property insurance policy helps cover repairing the physical damage of your building and replacing its contents in the case they are damaged by fire, some natural disasters, theft, or vandalism. 

Business Interruption Insurance

If your auto dealership and the cars on your lot are significantly damaged due to storms, a fire, or other mishaps, business interruption insurance can help offset your costs by covering your lost profits, paying employees' wages, taxes, operating expenses, and more. This coverage is often referred to as business income and extra expense.

Business Owners Policy

A Business Owners Policy (BOP) is usually a combination of general liability, commercial property, and sometimes business interruption insurance. It’s usually packaged at a more affordable price than purchasing each coverage individually. Depending on the insurance company, they sometimes bundle other coverages related to your industry under the same insurance policy. 

Commercial Auto Insurance

You need to protect the monetary investment you've made in the vehicles on your lot. That's where commercial auto insurance comes into play. It includes things like personal injury protection, collision coverage, comprehensive coverage, and can include additional endorsements to protect you and your employees if an accident occurs.

Workers' Compensation Insurance

If you employ auto mechanics, sales professionals, administrative assistants and any other type of employee—you need workers' compensation insurance. Workers' compensation helps pay for medical costs and lost wages if an employee is injured or becomes ill on the job. Most states legally require workers' compensation if you hire a certain number of employees. Make sure you check your state regulations and get the coverage you need.

Errors and Omissions Insurance

If you or an employee of your business are accused of professional negligence or other errors in judgment that cause harm to a customer, you can be held legally liable. Errors & Omissions Insurance (sometimes referred to as Professional Liability Insurance) provides coverage to protect you and your business if a claim is lodged against you. Check with an agent about the services you provide to see if this liability coverage is necessary for your business.

Employment Practices Liability Insurance (EPLI)

Employment Practices Liability Insurance (EPLI) is necessary in case an employee sues your company or you as the owner for discrimination, harassment, wrongful termination, breach of contract, etc. With this coverage, your insurance company will provide you with a lawyer and cover legal fees and settlements.

Other Policies to Consider to Protect Your Car Dealership

What else should you consider to protect your inventory, employees, and customers?

  • Dealers Open Lot: If your auto dealership contains vehicles mostly in an open lot, there are a lot of inherent risks. This addendum to your auto policy can include comprehensive coverage for damage resulting from lightning, storms, hail, flooding, fire, explosions, and vandalism.
  • Garage Liability Insurance: If you have an auto repair shop onsite at your auto dealership, you may want to consider garage liability (which can be bundled with certain policies). 
  • Garage Keepers Liability: If you run an auto repair shop, this covers associated repair expenses if a customer’s vehicle is damaged on your lot while in your care. 

We always recommend speaking with an experienced insurance agent to help you determine the risks your business faces and what insurance solutions you should consider.

How Much Does Auto Dealer Insurance Cost?

Because the cost varies considerably, most insurance companies don’t list generic pricing on their websites. Some of the variables they may consider include:

  • How many vehicles are on your lot
  • The price point of the vehicles you sell
  • The number of employees you have
  • Whether or not you also offer auto repair
  • The age and size of your commercial property

These are just a few of the factors taken into consideration. For a comprehensive look at what the cost may be, talk to an agent today. 

Get a Free Auto Dealership Insurance Quote

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