Every business needs insurance coverage; it helps to save huge costs when disasters strike.
But since we are focusing on “used car dealership insurance,” the policies and recommendations available on this post revolve around the used car dealership insurance business.
As with other auto businesses, there are standard insurance policies a used car dealership is expected to have.
The policies differ from states, and you must get them before you can operate freely within the state.
One of the problems faced by dealerships is how to get the best insurance deals for their business.
Well, there are quite many ways to get the best deals:
- You can sign up for newsletters on sites that publish auto insurance deals to stay on the loop.
- Request quotes from different companies, then compare and contrast the prices.
- Ask important questions to the sales representative before finalizing a deal.
Used Car Dealership Insurance
Although these policies are poised for used car dealers, they also apply to the auto business in general.
Thus, whether you deal with brand new autos or used auto, consider getting most of these policies as they’d cover a lot of costs and save your budget from uncertainties.
1. General Liability Insurance or CGL
Every business faces different risks; there’s no doubt about that; however, auto dealers seem to face some of the costliest risks.
Obtaining a General Liability Insurance coverage for your used car dealership is one of the best moves you can make to secure your business and personal budgets from uncalled expenses.
Why do you need this coverage?
Let’s use these practical examples to explain the need for General Liability Insurance for auto dealers.
If a buyer comes to your dealership to acquire a new car, the customer would obviously want to look around and see what you’ve got (even though he might have a car in mind).
Now, as the buyer is walking from one end to another, there might be an obstacle somewhere, which the buyer might not see, and eventually collide with it; thus, sustaining an injury (minor or severe).
In such a scenario, if you have General Liability Insurance coverage, your insurer will pay for your customer’s treatment. This can save a reasonable cost, apparently.
Here’s another example:
A buyer comes to purchase a used car from your dealership; one of your drivers is testing another vehicle (probably a drive-in).
Peradventure, the driver hits the customer while reversing or test driving, thereby causing the buyer to sustain a severe injury; in some cases, the buyer might file a suit against your dealership.
However, General Liability Insurance will take care of the fees associated with the lawsuit.
There are quite many reasons to go for this insurance policy if you run a used car dealership business.
It practically covers the following uncertainties:
- Property damage
- Personal and advertising injury
- Bodily injury
- Medical bills
- Legal defense and judgment
Based on different factors, the price for this insurance differs from state and insurers. There are other ones to consider, too.
2. Garage Keepers Liability and Garage Liability Insurance policies
Garage Keepers Liability differs from Garage Liability, and even as they appear too similar, their functions (coverage) are quite similar too.
These two insurance policies are unique, providing different coverage and features.
Actually, the Garage Keepers Liability policy covers the stuff that are not yours but kept within your care.
In contrast, the Garage Liability policy covers only the stuff that is rightfully owned by your dealership.
There are exceptions and add-ons that can make these policies appear almost the same. Still, there’s a need to acquire both if you run a used car dealership.
Why do you need this coverage?
Let’s assume your dealership also provide auto repair services; hence, customers who bought from your dealership can drive in their autos for repair by your verified mechanics.
Okay, what if you accept trade-ins? Or simply put, there are vehicles parked in your lot/garage that is not owned by your dealership.
This is totally safe, but what about unforeseen disasters such as car theft, accidents, or natural occurrences (earthquakes, landslides, etc.)?
The example below explains the difference between these policies and clearly points out the need to purchase both.
Someone drives in his/her vehicle to your dealership for repair or as a trade-in, then your mechanic takes the vehicle for a test drive to ascertain its authenticity and/or detect the problems to be fixed (repaired).
However, during the test drive, for one reason or another, the mechanic rams into another vehicle parked in the lot and probably totaled the two (the customer’s vehicle been tested and your owned vehicle parked in the lot).
In this situation, if you purchased Garage Keepers Liability and Garage Liability policies; the former will pay for the totaled customer’s vehicle, while the latter compensates for your owned vehicle.
So, you’d likely not contribute a dime to replace the customer’s vehicle or yours that was damaged too.
Hence, in simple terms, Garage Keepers Liability pays for damages to customers’ vehicles parked in your garage, while Garage Liability pays for damages to cars owned by your dealership.
3. Workers’ Compensation Insurance
Being an employer comes with quite a bunch of tasks you must do; watching over your employees’ health is one of those vital tasks left for you.
Workers Compensation Insurance, a.k.a. Workman’s Comp is an underlying policy every auto dealership must get.
It is an insurance policy that covers the health of your workers.
Apparently, you know thatyour workers can file a lawsuit against your business for negligence.
But when you’ve got Workers Compensation Insurance coverage, your insurer would take care of your employees’ welfare.
For example, if a worker in your dealership sustains bodily injury while carrying out his/her duties, your Workman’s Comp will pay for the treatment and medical expenses.
This policy is a MUST in almost all states in the U.S.A.
What is covered by this insurance policy?
- Accidents or injuries sustained from running dealership business
- Repetitive stress injury
- Occupational illness
Certainly, there are exceptions to this policy, and most insurers offer add-ons for more coverage.
Consider this as the foremost used car dealership insurance policy to buy.
4. False Pretense Coverage
Running a dealership business or any garage-based business attract very costly risks.
Someone could steal a car and come to your dealership to facilitate a trade-in.
Well, you may be confident that you can discern between legitimate sellers and illegitimate ones, but you never can be so sure.
Hence, this insurance coverage is highly recommended, most especially for used car dealers.
The False Pretense Coverage is a neglected, used car dealership insurance policy that protects your business from non-physical damages such as purchasing a stolen car or a potential buyer eloping with your car during a test drive.
This coverage can act as a supplement to your existing policies that cover physical damages and other significant aspects of your dealership business.
False Pretense Coverage isn’t too costly compared to other types of policies; however, it all depends on the insurer and the package you’re purchasing.
The example below further explains the need to acquire this coverage as a used car dealership.
Why do you need this coverage?
Let’s assume you bought a used car from a private seller, not knowing that the car was stolen from somewhere.
The seller may have presented you with a fake title document and other documents required to complete a car deal.
However, after a while, you got to know that the car you bought was a stolen one, and you can’t locate the seller anymore – if your dealership is insured for this, you will be covered against the lawsuits and other expenses relating to the deal.
Nevertheless, insurers that provide this policy aren’t many yet.
NB: the False Pretense Coverage also applies when you buy an auctioned car from someone who doesn’t have its legal title.
Plus, when a buyer elopes with your car during a test drive, this policy will cover the loss.
5. Crime Insurance
This policy is quite straightforward and easy to understand; it provides coverage in car theft cases and other criminal-related acts that affect your business.
The advent of technology caused an increase in cybercrime; however, there are still ways to protect your business against this, and purchasing a Crime Insurance policy is one of the ways to do that.
When you have this policy coverage, you’re covered against internal or external criminal acts that affect your business operations.
What’s covered by this policy?
- Any sort of forgery, burglary, or extortion
- Robbery such as car theft
Basically, these are the two aspects covered by this policy, but you can apply for add-ons for more coverage.
We sincerely recommend this used car dealership insurance coverage for all garage business owners since it is not actually possible to monitor your business 24/7.
It’s the optional insurance coverage; you can ignore this if you think it doesn’t apply to your dealership.
6. Automotive Professional Errors and Omissions
This is yet another important policy for auto dealerships (in general); it protects both the business and its workers from false accusations and certain cases due to negligence.
Errors and Omissions coverage commonly referred to as E & O coverage is recommended for all businesses and not just used car dealerships.
It is professional liability insurance that provides coverage against claims of inadequate work or negligent actions.
Humans are quite liable to make mistakes inasmuch as they try to be extremely careful in all their doings.
For example, you didn’t notice an omission or mistake in the title of the cars you bought, and a lawsuit is filed against your dealership for this reason.
When you’re covered for E & O, your insurer will take care of charges from this lawsuit and other related expenses.
This coverage also protects your workers from false claims of inadequate work or negligent actions by other people.
That is to say, when a customer insists that one of your workers’ was very unprofessional or showed negligence during a deal, or claim that your business provided misleading advice and other claims.
This coverage can you reasonable cost and protect your budget.
7. Dealers Open Lot Coverage
Don’t confuse yourself with the Dealers Open Lot Coverage and Garage Liability coverage; they tend to offer the same coverage, but they are two different insurance policies.
Dealers Open Lot Coverage, also referred to as Dealer Physical Damage Coverage, is a professional insurance policy that offers protection against several damages to vehicles that are owned or used by your dealership.
It seems more comprehensive than Garage Liability coverage.
Let’s assume that your dealership has vehicles that can be driven by the workers to accomplish business operations.
When you obtain Dealers Open Lot Coverage, it will cover such vehicle(s) when they get damaged as a result of being used to facilitate business operations or deals.
More interestingly, this policy protects against specific hazards depending on the package you purchase from an insurance company that provides this service.
Dealers Open Lot Coverage can cover for fire hazards, lightning, windstorm, explosion, flood, hail, theft, malicious mischief, and vandalism.
Certain packages can offer more interesting coverage options.
We recommend this coverage for all dealership businesses, whether it is a new car dealership or used car dealership.
As mentioned several times in this article, running a used car dealership business attracts many risks; thus, you should guard the business with a couple of these used car dealership insurance policies that offer important coverage.
Nevertheless, since these policies are not compulsory, you could ditch them and run your dealership just the way you wish.
But we will strongly advise that you consider these policies; they’ll save your good cost in different scenarios.
We do not offer/sell insurance coverage; our team of auto experts simply carry out researches to come up with the tips and recommendations provided on this website.
Kindly check the homepage for more news and articles regarding used cars for buyers and dealerships. Do enjoy your day.