Every business needs insurance, but a standard policy may not cover all risks. Car dealerships face unique challenges that require specialized coverage. This guide shows the types of insurance car dealerships need to stay protected and keep running if something goes wrong.
Insurance Coverage for Car Dealerships
For auto dealerships, car inventory is the bread and butter of the business. Unexpected events can cause serious financial loss if a dealership is underinsured.
Dealership owners don’t have to insure every car on their lot. But they do need insurance that covers their vehicles as part of their property. That’s why new and used dealerships need different types of insurance to protect their business and cars from unexpected damage.
Some common types of insurance car dealerships need to protect against unexpected damage include:
Commercial Property Insurance
All businesses should have commercial property insurance. Fires, theft, vandalism, floods, hail, or other disasters can cause property damage. For car dealerships, cars and trucks are often displayed outside, leaving valuable inventory at risk of serious damage.
Commercial property insurance covers damage to a business’s buildings, tools, stock, and other people’s things. It can also pay to replace stolen items or cover costs from theft.
Auto Dealer Insurance
Auto dealer insurance is a special type of business insurance that covers many parts of running a car dealership. It is made to protect against test drives, employees driving dealership cars, and other problems that can happen at the dealership.
It’s not just car dealerships that need auto dealer insurance. In fact, a wide variety of businesses need this type of coverage, including:
- New and used car dealers
- Motorcycle dealers
- Recreational vehicle dealers
- Boat dealers
- Trailer dealers
- Auto repair shops
- Farm equipment dealers
- Car rental businesses
Most auto dealer policies encompass several types of coverage, such as:
- Dealer’s Open Lot Insurance: This insurance covers the vehicles on a car dealership’s lot that are for sale. It also covers cars that may be damaged in a wreck or collision and applies when a car is driven by an employee or by customers on a test drive. Dealer’s open lot insurance can also cover the dealership’s losses in some cases of theft.
- Garage Keeper’s Insurance: This coverage protects customer-owned vehicles left for repairs against unexpected damage. It includes fire, theft, vandalism, extreme weather, and collision damage that might happen on the dealership’s property.
- Garage Liability Insurance: Garage liability insurance, also called garage keeper’s insurance, protects car dealers and their businesses. This policy covers bodily injury and property damage caused by accidents that happen on the dealership’s property.
Business Interruption Insurance
While most standard insurance covers damage or loss to property, it does not cover lost profits if a business must close for a short or long time. Business interruption insurance helps owners by paying for lost income and employee wages when the business has to close.
For example, if a car dealership is vandalized, commercial property insurance may pay to fix the damage. But the business will lose money if it has to stay closed for repairs. Owners may even need to open a temporary office or move for a time while the property is being fixed. Business interruption insurance can also pay employee wages, taxes, operating costs, and rent.
General Liability Insurance
General liability insurance is the basic coverage for most businesses, including car dealerships. General liability insurance protects you from third-party claims. For example, if clients or delivery people slip and fall while on the premises, dealership owners can be held liable for their medical costs. General liability coverage also covers third-party property damage, libel or slander, and more.
Car dealerships need specialized insurance to protect their vehicles, property, and business from unexpected damage and losses.
Factors that Determine Car Dealership Coverage
Most dealerships have these insurance policies, but each one is different and may need extra coverage for certain risks and needs.
Some of these factors that determine car dealership coverage can include:
Dealership location:
Where a dealership is located can greatly affect the types and amounts of insurance needed. Coastal areas with hurricanes or earthquakes may need extra policy endorsements for those risks. Dealerships in areas with wildfires may need different endorsements.
Dealership size:
The size of the dealership can affect how much inventory it has and how many workers it employs, which can change coverage needs. For example, a large brand-name dealership in Houston or Dallas may need higher coverage limits for its inventory than a small, privately owned used-car lot.
 Dealership services:
Dealerships that offer financing, repairs, and maintenance may need more coverage than dealerships that only sell cars. Owners should check policies based on the services their dealership provides.
 Franchise vs. independent dealerships:
Large franchise dealerships must follow insurance rules set by their manufacturer agreements.
Mitigate Dealership Risks
It is very important for dealership owners to spot and reduce risks before a claim is ever needed. Installing security systems to stop theft, break-ins, and vandalism, training employees on safe ways to handle vehicles, and checking the building and equipment often to prevent damage or accidents can save owners money and trouble over time. Taking these steps can help protect both the business and its property.
Doing these things is also important to avoid having a claim denied. If an insurance company requires certain safety or security rules and the owner does not follow them, the insurer may not pay the claim at all. Following all safety and security rules helps make sure insurance stays valid and claims are more likely to be approved.
Following all safety and security rules helps keep insurance valid and makes it more likely that claims will be approved.
Commercial Property Damage Lawyers
Owning and running a car dealership means making sure the business is protected from unexpected events. Even when a covered event happens and a claim is filed, an insurance company can still delay, underpay, or deny payment.
Our lawyers have handled thousands of insurance disputes and can review your coverage to find gaps or payments you may be owed. Contact us today to learn how we can help your business.