America has the largest number of motorists per capita. So, car dealerships are among the country’s most popular small businesses. If you count among them then you should definitely consider automobile dealer insurance.
At the same time, automobile dealers have so much to take care of: manage inventory, comply with the latest workplace safety requirements or make sure that their customer service is top-notch.
Understandably, most of them think they could save on automobile dealership insurance by not buying a policy. If you think car dealership insurance is expensive, think again. Can you afford to rebuild your business from scratch if a natural disaster struck?
What is car dealership insurance?Auto dealership insurance offers comprehensive business coverage to automotive businesses across the USA. This particular type of insurance program first and foremost safeguards the financial interest of your business.
You can arrange with the insurance broker to have some high-value replacement parts covered against theft or physical damage. Alternatively, the auto dealership insurance can be tailored to cover claims from customers who get injured on your premises.
There are plenty of insurance options, depending on the size of your car dealership. It is not uncommon for automobile dealerships to sell recreational boats, so you can have them insured, too.
Who needs car dealer’s insurance?
It’s good to have a valid auto dealer’s insurance policy if you run one of the following businesses:
- If you sell automobiles, motorbikes, or trailers (new or secondhand)
- If you sell motorhomes or RVs
- If you sell tractors, harvesters, and other farming equipment
- If you have a service station
- If you have a gas station
- Used car dealers
Is the auto dealer’s insurance worth it?
Buying auto insurance solutions for your small or medium-sized business protects it from a wide variety of risks. After the first year, you will notice that part of your profit has gone towards the monthly premiums’ cost.
The long-term peace of mind that it brings is likely to be worth every cent of your investment. Besides force majeure, automotive business insurance gets your business covered should liability costs, lawyer’s fees, or sumptuous court rewards put the financial future of your dealership in jeopardy. Although not mandatory, car dealer insurance is adequate to have.
Auto Dealer Liability Coverage
An auto dealer’s liability policy typically covers the following unforeseeable events:
Suppose someone burgled your deluxe showroom and stole the gem in your collection. Auto dealers pay a ton of money for security per month, so you may think the risk of auto theft is low.
Most auto dealer insurance providers offer their customers special Crime Insurance bundles that also cover property damage caused by burglary, robbery, and other criminal activities.
The scope of your car dealership insurance coverage may extend to unpredictable natural disasters like hurricanes, earthquakes, and floods. Should any of these events occur, you may be able to file a claim with your insurer to compensate you for property damage, bodily injuries per employee, or physical damage to the vehicles you sell.
“But some stupid with a flare gun burned the place to the ground…”
What if you have one on your payroll? A fire caused by an employee’s negligence can engulf your entire showroom in minutes, causing damages to the building, the vehicles, and the inventory worth millions of dollars.
Fortunately, natural calamities and man-caused disasters are covered by the so-called Business Income Policy included in your auto dealer insurance.
Popular auto dealer insurance policies
Here are some business insurance policies that you can ask your insurer about. Although not mandatory, they can offer tailored protection to your automotive dealership.
Dealer plate insurance
This policy covers accidents that may occur while your customers are test-driving your vehicles. It covers physical damages to the vehicles, any injuries the driver may suffer, and third-party claims.
This is a very comprehensive policy covering franchised auto dealers against accidental injury and property within your repair shop or showroom. This umbrella insurance combines the protection of General Liability, Legal Liability, Commercial Auto Insurance, and Workers Compensation Insurance.
Commercial General Liability insurance covers you for legal and settlement costs if someone or something is harmed by your small business.
Your general liability policy does not cover costs for bodily injury to your employees as that requires separate workers compensation coverage.
While most business insurance is not a legal requirement in any state, Workers Compensation Insurance is – and indeed every state for that matter apart from Texas.
This provides cover for medical bills, time of work as well as other financial costs caused by bodily injury or death if one of your employees is harmed while working for you.
Some states even require Workers Compensation Insurance even if you only have one employee, or sometimes two or three. You can also get it if you’re self employed. Contracts with other companies often also require it.
Regardless of these factors, workers compensation coverage could be a very valuable investment as part of your insurance needs should you ever need to claim for it as workers compensation costs can be staggering.
Garage Keepers Liability
This insurance policy covers claims for physical damage to your customer’s vehicle while the latter is in your custody or control, like when you have been repairing it.
Employment Practices Liability Insurance
If you have employees then besides mandatory worker’s compensation insurance you should consider optional Employment Practices Liability. EPLI offers protection for employment-related charges such as harassment, wrongful termination, discrimination, breach of contract, retaliation, and other work-related issues.
Errors and Omissions (E&O) Insurance
This special liability covers claims arising out of erroneous repair works or omissions of critical steps in the repair process.
Open Lot Insurance
Big auto dealers usually provide their employees with service vehicles for greater mobility. It is a good idea to have this fleet protected with this optional insurance against physical damage.
Car Dealer Liability Limits
The car dealer insurance is an insurance package rather than a single policy. All states have particular requirements about the limit of the Garage Liability Insurance that car auto dealers must have. The minimum insurance limits are about $100,000 bodily injury per claimant, but no more than $300,000 to all individuals injured in the vehicle.
For property damage, the minimum limit is about $50,000 and covers damages to a third party’s property, movable or immovable. These limits depend on the claims’ history of your business.
Auto businesses in the USA mostly buy general liability policies with coverage of up to $1,000,000 and $2,000,000 on the aggregate.
Before buying an auto dealership insurance bundle, you should ask several different insurers for quotes. Of all policies listed above, you should pick up only the ones that cover tangible risk factors.
Why register your auto dealership as an LLC?
There are a number of potential advantages that you should consider. First, an LLC set up by a reliable formation service like ZenBusiness offers the liability protection of a corporation and the tax benefits of a partnership.
As an LLC owner, you are not personally liable for the entity’s losses or legal obligations. The LLC’s business income is protected from double taxation. Any gain or loss from the legal entity passes through to its members, who pay taxes at their individual tax rates.