If you have a franchise or non-franchise dealership in Kentucky, you have a lot of skin in the game with the number and total value of cars on your lot each day. Your financial livelihood is at risk, and you want to make sure you’re covered properly without overpaying. You need several different insurance coverages to protect you and your business financially and the reputation you’ve built. Let’s talk in-depth about your dealer open lot coverage. Specifically, let’s discuss using non-reporting coverage vs. monthly reporting forms.
One area of insurance we focus specifically on is insuring garage and dealership operations. From one man shops to large franchise dealerships, we’ve built insurance programs for each level of your business.
This coverage is called several different things: dealer blanket, inventory coverage, open lot coverage, floor plan insurance, and the list goes on. It’s also covered several different ways.
Should You Cover Your Lot Insurance Through Your Floor Plan?
When working with franchise dealerships, whether it be GM, Hyundai, Toyota, or Chrysler, you are sometimes offered this coverage as part of the floor plan financing package you put together with your brand. We see these packages all the time especially for new franchise dealerships starting out. Don’t get it twisted though…you aren’t just being given the insurance…you’re still paying for it. The insurance coverages they set for you are no different than what you can find on the open market, but the premium you pay for the coverage is different. You’re just paying your franchise brand rather than having an agent shop the best coverage for you.
What is Dealer Blanket Non-Reporting?
Depending on the insurance company, you can structure your floor plan coverage one of two ways:
is a Non-reporting form basis, and the other way is a reporting form basis. Typically, dealerships that have $750,000 to $1,000,000 in inventory go with a non-reporting form. The inventory you carry on your lot changes week to week, even day to day, but with a non-reporting form you are telling the insurance company you only want physical damage coverage on your vehicles for a pre-determined maximum limit. So if you have $500,000 worth of vehicles on your lot you would tell your company you only want coverage for a maximum of $500,000.
Where you could run into trouble here obviously is if you hit a run of good luck at an auction on some deals you can’t pass up, and your inventory temporarily surpasses that $500,000 threshold because that’s when the next hail storm would roll through town, right? The insurance company would only pay a maximum of $500,000 even if you had $600,000 on your lot at the time of the claim.
What is Dealer Blanket Monthly Reporting?
When we work with dealers that have $1,000,000+ in inventory, we encourage them to use a monthly reporting form. This is easier and less daunting than it sounds. You pull your financial statement at the end of the month, or whatever similar report you run, and with just a few clicks you send that total inventory on hand amount to the insurance company. You don’t list all your cars or anything like that, it’s simply the total amount on hand at the end of the month.
Why Should You Choose Dealer Blanket Monthly Reporting?
Why would you want to add this extra step? Well, there are several advantages:
- Like the earlier example we mentioned the total value of vehicles on your lot changes day to day. If you look back at past financial statements, some months are typically much higher or lower than the month before. You don’t want to have to remember to increase your inventory with the insurance company each month so the reporting form option covers you based on a rolling 12-month average. This allows your inventory to fluctuate high or low while still keeping you covered.
- This option can give you both better coverage while also saving you money which is exactly what you want, right? Let’s say on a high end you have $10,000,000 in inventory, but on a low end it may hit $8,000,000 some months—especially right now when getting inventory is insanely difficult. Your average inventory over the past 12 months is only $9,000,000. Choosing a “non-reporting” form means you’d have to be covered and pay the premium for a maximum of $10,000,000 in coverage. Choosing a “reporting” form would allow you to still be covered for the same $10,000,000 in coverage, but you’d only be paying premium based on the $9,000,000. See…same or better coverage, but at a better price. It’s a win-win.
You may be thinking, “I’m way too busy to add something else to my to-do list.” The good news is insurance companies that offer a reporting form basis typically give you flexible time. Typically, you have until 15 days into the next month to get this report in on time. For example, you would have until June 15th to submit your May inventory report.
Next Steps
If you have a dealership or garage business and have more questions about your insurance program give us a call, 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 our YouTube channel.
We look forward to working with you.
