Insurance For Used Car Dealers: A Comprehensive Guide.

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Every business faces one risk or another, and there is no easier business to do. For car dealers, they face some of the costliest business risks.

Dealerships trade different cars virtually on a daily basis, and there are usually lots of rides parked in their lot.

You will want to check out how Used Car Mechanical Breakdown Insurance works.

These cars on the lot can be exposed to physical damages or even technical damages, and this can affect the sale of the vehicle as nobody would love to buy a faulted car (at least not at the normal price tag).

When a car gets a physical fault while still parked in the dealership’s lot, it is the car dealer’s sole responsibility to fix the fault irrespective of the repair cost.

In this article, we are going to discuss quite a lot of points regarding insurance for used car dealers. Set yourself ready, and let’s start.

If the car dealer ignores the fault or damage on the car, then he should be willing to cut down a bulk sum from the car’s actual price.

No one would love to buy a used car that’s already wearing physical damage. Now, that’s just one part of the problems faced by used car dealers.

There are many other hazards faced by dealerships that sell used cars; hence, it is advisable to apply for a couple of insurance policies to curb the expense of the possible problems you’ll encounter as a used car dealership.

You already know that you need an insurance cover for any business you do. You want to know what to do after buying a used car.

However, different policies have limitations – there is typically no policy that would cover everything (insurance) you need for a used car dealership business.

Insurance for used car dealers: what does it mean, what does it imply?

There are requirements that qualify you for used car dealership insurance. These requirements must be met, and different insurance companies may not request for the same documents.

More so, you should understand that this is different from personal insurance.

Typical dealership insurance will cover all the used cars parked in your lot; however, the more cars on your lot, the costlier the insurance cost.

As with other businesses, you will find more than one type of insurance for used car dealers; it could be challenging to identify the perfect one for you.

The typical errors and omissions insurance policy for auto dealers is one of the most common policies purchased by dealerships.

However, since everyone would definitely not need the same insurance coverage, the errors and omissions insurance policy isn’t a must-buy.

When you purchase insurance coverage for your dealership business, you’re eligible to request help (from the insurance company) to handle one or more problems you encounter in the business. 

But the problem is getting the right company that offers dealership insurance.

Not all top insurance companies provide coverage for used car dealerships – so, how are you going to find the best company to trust? By the way, is there any such thing as insurance for used car dealers?

Well, this article answers a lot of questions regarding running used car dealership business.

Why you need the used cars’ dealership insurance?

Many people are increasingly picking interest in used cars over brand new ones.

Hence, a used car dealer is liable to complete car sales within a day. This may sound pretty interesting to you, but it also increases risks.

Some of the possible risks may include:

  • A severe crash incurred when a buyer is test-driving
  • Accidents that may occur while a buyer is checking out your lot
  • Physical damages on the cars in your lot

What is covered in an auto dealership’s insurance? (Bonus)

The coverage depends on the type of insurance you purchase. When you purchase a General Liability insurance, it covers for incidents such as a customer slipping and injuring themselves in your lot or showroom.

If you need cover for collisions while the car is being transported to the buyer, you would need to buy a policy that provides such coverage.

That said, you need to know about the different types of auto dealership insurance policies and where to get them.

Types of insurance for used car dealers (All-Inclusive)

Note: the costs of these used car dealer insurance policies vary by the company.

Dealers Open Lot Coverage

This insurance policy has different names (depending on the insurance company); it can be called “Dealer Physical Damage Coverage.”

Regardless of the name, it is a policy that covers your cars parked in the lot.

That is to say that it does not cover for other people’s vehicles parked in your lot or garage for whatever reason.

Cars covered in this policy include those that are placed on sale and the ones used for business purposes – the coverage offered by this policy’s coverage is protection against specific hazards, explosion, lightning, windstorm, flood, hail, theft, malicious mischief, and vandalism.

When you buy this insurance coverage from ICNE, the policy will cover the repair cost for anyone’s vehicle that sustains collision damage from an accident.

Other companies that offer this policy may have other features to provide their customers.

Commercial General Liability

Some issuers may simply refer to this insurance coverage as “General Liability.”

General Liability
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This insurance is very necessary and important for all auto dealerships; it is such that covers for accidents that occur in your lot or showroom.

For example, maybe a buyer is checking out what you’ve got on your lot and then gets injured after being slipped by oil drops on the floor.

Also, this insurance covers for other incidents that may occur within the dealership’s premises.

When you purchase this policy from some insurance companies, itcovers property and casualty damage, libel, slander, as well as copyright infringement (as add-ons).

Hence, there are policies that won’t cover all of these packages.

False Pretense Liability Coverage

Not all insurance companies that provide auto dealership coverage also offer policies for this coverage.

However, the False Pretense Liability Coverage protects you from fraud. It is very important – one of the common risks faced by dealerships is purchasing used cars from people who don’t actually own the vehicles.

Now, with this coverage, you’re covered against any fraud-related financial loss.

An example is this; if you were tricked into purchasing a used car at an auction from someone who does not have legal title to it, your insurer would cover you for any financial loss that comes as a result of this situation.

Furthermore, if a buyer drives off with a car while test driving or lost a car through fraudulent means, this coverage will sort things out.

Errors and Omissions (E&O) Insurance

As a used car dealer, you need this coverage for the sake of your employees.

This policy covers errors or omissions that may come from you or your employees while discussing business with a potential used car buyer.

Dealer Plate Insurance

Obviously, a buyer would want to test drive the car before finalizing the deal. Sometimes, buyers may take the car to the road for this purpose (test driving), and if they should get involved in an accident, this policy will help to save your business from the lawsuit.

Also, since insurance coverage is a must for every car on the road, this policy looks to be very important for auto dealerships.

Note: at the time of test driving, the car still belongs to the dealership and not the driver (potential buyer).

Business Income Insurance

As the name implies, this insurance coversyour dealership businesses in case of natural or human-made disasters.

You’ll get financial backing from your insurer to take care of damages that were caused by the disaster.

There are other things covered by this insurance policy; however, depending on the insurer – the coverage levels may differ.

The variations of this coverage are quite many – you have to carefully select the one that is the best fit for your dealership business. 

Garage Keepers Liability

It is important that you get this insurance if you accept used cars into your garage for bodywork or repairs.

The used cars for repair may not be owned by you, and should anything happen to the car; the expenses will be left on you.

Hence, it is advisable to pick up this coverage if you’re such a dealer.

Garage Keepers Liability covers for damages that may happen to a customer’s vehicle while parked in your lot for repair or bodywork.

More so, if you accept trade-ins, you should consider this coverage. What’s covered by a Garage Keepers Liability license included accidental fire outbreak, vandalism, collision, or weather hazards.

Workers Compensation Insurance

This insurance for used car dealers covers the medical expenses for injured workers.

However, the employee must have sustained the injury while performing his/her duties for the dealership.

Any injury sustained by an employee that is not incurred while running activities for the dealership – the medical expenses for that will not be covered by this insurance.

Business Property Insurance

Applies to damages on your business gears or equipment such as the furniture, computers, supplies, etc. if either of these items used in running your dealership business fails, this insurance will cover for the expense of fixing/replacing it.

Cost of insurance for used car dealerships

The cost differs by insurers and the policy you’re choosing. You may need to place a call to the insurer’s customer support team to get the accurate pricing of the policies you need to purchase.

However, it is advisable to buy all the policies you need from a particular auto insurance company. It saves cost and time.

Possible factors that affect the cost of getting insurance coverage for your dealership business:

  • Your location(s).
  • The number of employees working in your dealership.
  • What’s the size of your dealership? This can include the number of cars parked in your lot, the landmass (square footage), etc.
  • The insurance policies you’d love to buy

While you won’t get similar discounts as you’d get for your personal car insurance, there are some practices that can reduce the rates you pay for auto dealership coverage.

Requirements for used car dealership’s insurance

Well, each state has its rules and regulations for companies/businesses operating within its jurisdiction.

So, the requirements for getting insurance coverage can differ from state to state.

Also, different insurers may request various documents before providing you with a coverage policy.

A practical example is this; the requirements for getting a used car dealer plate insurance in Florida will differ from the requirements when you go to California.

Furthermore, you may be limited to some particular insurance policies due to your state’s law.

The best way to get the requirements is by contacting the insurance company, providing your details, and telling you the requirements needed from you.

What more?

Getting dealership insurance coverage is quite different from personal used car insurance; the requirements aren’t the same, and the costs aren’t the same, too.

As you would guess, dealership insurance would cost more than personal insurance; more so, there aren’t so many companies that offer used car dealership insurance policies.

Nevertheless, everything points down the type of coverage you need for your business. You can buy different policies for different coverage levels.

However, not all insurance companies provide all the policies you may need; hence you can buy from different companies.

Furthermore, before buying a policy from an auto dealership insurance company, there are some important questions you should ask the agent.

These questions would help verify the company’s credibility and willingness to secure your business from unforeseen hazards and risks.

Some of the questions to ask include:

  • Are there any discount offers, and how do we (your business) qualify for that?
  • What are your rates per policy?
  • Are there other types of insurance you provide, or just auto dealership insurance?
  • Is it possible to change or cancel a running policy?

There can be other questions you may want to ask, and you shouldn’t shy away from asking them.

More tips about used car insurance and maintenance tips can be found on our website.

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