Auto dealers face a lot of risks and would rather spend their time on revenue-generating activities. There are 6 insurance tips for independent auto dealers from insurance company underwriters. The good news is most dealers can properly address these issues even on a limited budget. Let’s dive into the six tips for your independent auto dealership.
One area of insurance we focus specifically on is for independent auto dealers. From one man shops to large franchise dealerships, we’ve built insurance programs for each level of your business.
So…what does your dealership need to be on the lookout for?
#1 – Damage to Vehicles in Transit
Typically, your dealer’s open lot insurance coverage will include a limited amount of coverage for vehicles in transit. By this, I mean vehicles you’ve bought at auction, maybe from other lots, and so on that are being transported either by you or a third party or someone you contract out.
The key term I used there is “limited” coverage. You may only have a limited amount available on your own policy, and/or your coverage may be limited to a 50-mile radius in Kentucky.
How do you address this?
If you use a third party, you need to get a certificate of insurance showing that they have cargo coverage and the limits they carry. This is a routine process, and the ones that have the proper coverage will have no problem providing it to you in a timely manner. If they don’t have coverage, your coverage would step in in the event of a claim.
If you use contract drivers, your insurance company might require you to list the drivers on the policy in which case their MVRs will be checked. An alternative to this would be for them to provide a certificate of insurance naming your business as an additional insured.
#2 – Test Drive Accidents
Nothing has ever gone wrong during a test drive, right? (insert test drive video wreck)
Okay, so honestly, this is where most claims occur, mainly rear-end collisions.
I’m here to let you on a secret about how your insurance company wants you to handle test drives. Just keep it between us, okay?
- The salesperson needs to accompany the test drive.
- Don’t allow overnight test drives. This one raises red flags with insurance companies. If you do, they’re likely to decline to quote or offer you coverage.
- This one is more of a bonus, but make sure you are checking driver’s licenses. You know the drill…make sure it’s legit, not expired, and if it’s a commercial vehicle that they have the proper CDL.
#3 – Out-of-State Owners Are a Red Flag
Speaking of red flags, insurance companies want owners who are active and present in the business. Yes, you can spend time on vacation, but if you live out of state, how can you properly monitor the daily activities within the dealership?
Exceptions can be made here if we’re talking about a dealership in Kentucky and you live 20 minutes away, just across state lines. The problem is when you want to own a dealership in Kentucky but live in Florida. This can be tough to get approval for an independent auto dealer.
#4 – A Limit of Dealer Plates
Do you really need that many dealer plates? I mean, really? If you watched one of our earlier videos, you know that one of the key factors in determining your garage liability insurance premiums is based on the number of dealer plates you have.
Look, we get it. You’re going to have at least two or three, no matter how small your business may be. You might also give some to a few key employees to increase compensation to keep key employees. The problem is when you start handing them out like Halloween candy. How awkward is Thanksgiving going to be with your family member you gave a dealer plate, causes a half-million dollar insurance claim, and skyrockets your premiums? Your new teenage driver also doesn’t need a dealer plate and doesn’t need to be on your dealership insurance policy.
#5 – Stop Leaving Keys Out
It’s like people spent all their time during the pandemic rewatching “Gone in 60 Seconds” or any of the “Fast and the Furious” movies because auto thefts have really increased. If you’re leaving keys out on the desk or hanging from a peg board all the time, or anywhere else unlocked and easily accessible, then how hard will it be for that employee you fired to tell someone what to expect when they break in during the night?
A lot of dealers are using specialized lockboxes with encrypted passwords changed regularly to keep keys safe and limits thefts.
#6 – Annual Sales
Do you have a business or just a hobby? If you aren’t planning on selling at least 15-20 cars per year, you might need even qualify with most insurance companies.
Auto dealer insurance companies aren’t exactly looking to cover your side hobby. They want you to be running a legitimate business. Flipping a few cars a year and getting dealer plates for your family members doesn’t make you an auto dealer.
Next Steps
If you have an independent auto dealership or garage business in Kentucky, and have more questions about your insurance program give us a call, or email me at asheridan@rbisomerset.com. Check out our other videos for your garage or dealership business. You can find them here on our website or on our YouTube channel.
Reference: Garage Insider: 6 Common Concerns Underwriters Have About Auto Dealers
