If you have a franchised or non-franchise dealership in Kentucky, you carry a significant amount of financial risk. A lot of that financial risk is tied up in the vehicles on your lot. Your lot is exposed to thieves, vandals, and the always lovely mother nature. There are several different insurance coverages you need to protect you and your business financially and the reputation you’ve built. For the purpose of this video, were going to talk Dealer Blanket or Open Lot Coverage.
I am Adam Sheridan with Reed Brothers Insurance and 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.
What is Dealer Blanket or Open Lot Coverage?
On a basic level, Dealer Blanket or Open Lot Coverage is insurance you get to protect against physical damage to vehicles owned by your business. This coverage is also called several different things: dealer blanket, inventory coverage, open lot coverage, floor plan insurance, and the list goes on. The policy can provide both collision and comprehensive coverage. However, as with all insurance, it’s important to know exactly how your policy is written.
Typically, this insurance provides insurance for owned auto, motorcycles, trucks, and trailers owned by your dealership entity (or entities as long as they are all scheduled on the policy). In most cases, the coverage extends to other types of vehicles like golf carts and scooters. This coverage can also pick up your RV provided that it is titled under a name scheduled on your policy.
These policies can vary greatly, so let’s dive into it more.
What Does Dealer Blanket Insurance Cover?
Some policies spell out or limit the comprehensive coverage. Sometimes the policy only provides you with “fire and theft” coverage rather than the full scope of comprehensive coverage. A policy may also be written on what’s called a “Specified Perils or Specified Causes of Loss” basis. This means the policy states only specific exposures that would be covered such as fire, theft, vandalism, wind, hail, and/or flood. If a policy only says “fire and theft” then there is only coverage on those vehicles for fire and theft. This means you would not have coverage for wind, hail, or vandalism claims.
Your deductibles can vary more on this policy than just about any insurance policy. It’s very important to know your deductibles to make sure they match up with your risk tolerance level. To put it in layman’s terms: what size check you are comfortable writing in the event of a claim?
What Collision Deductibles Do You Have?
Collision deductibles are typically pretty basic. Some dealerships we work with want their deductible as low as $500, while bigger franchise lots typically put their deductible at $2,500 or $5,000 per vehicle.
Why?
Let’s be honest…anything less than that you are going to eat it. You don’t want your insurance company knowing about it, right? But if it’s a total loss, then you also don’t want to be on the hook for the full amount. That’s why many dealerships go with a $2,500-$5,000 per vehicle deductible.
What Comprehensive Deductibles Do You Have?
Comprehensive deductibles, specifically wind/hail, are where we see the biggest issues arise when it comes to dealer blanket coverage. Many insurance policies work one of two ways for this coverage:
You either pay a deductible per vehicle…say $1,000 per vehicle, with a maximum out of pocket, let’s say $30,000. For example, if a hail storm rolls through and damages 100 cars you’re on the hook for $1,000 per car, but only a maximum of $30,000 out of pocket rather than the full $100,000.
The other coverage option is still the same deductible per vehicle, except in this case you don’t have a maximum out of pocket. This is typically referred to as “no aggregate.”
Let’s go back to that same example of 100 cars from earlier. Instead of holding the bag for just $30,000 now you’re going to have to write a $100,000 check. While this coverage option is typically cheaper on the front end, is it worth that extra $70,000 you just got hit for?
We get it…margins are tough in a dealership. It’s important to know exactly what your risk tolerance level is so that when Mother Nature comes rolling through in a bad mood, you aren’t stuck writing a check that could sink your business.
Most of the time, insurance policies have separate deductibles set up for comprehensive claims and wind/hail claims, too. For example, some vandal comes strolling through your lot during the night and keys 30 of your cars. You are likely to be capped on your out-of-pocket expense for this claim. If it had been a hailstorm like we mentioned earlier, you would be on the hook for every car.
What is False Pretense Coverage?
Another line item under this coverage is typically what is called “False Pretense.” You’re probably aware of this coverage, but may not entirely understand what it means. Long story short, it is simply providing coverages for a vehicle you or your employees voluntarily parted ways with as a result of a trick, scheme, or false pretense.
Let’s go over two easy examples of this. One would be someone coming onto your lot and going through the process to rightfully test drive one of your vehicles, but they never brought it back. Another example you are probably more familiar with would be a vehicle you acquired from someone that did not have the legal title. While it may sound like “theft” this type of claim would actually fall under “false pretense.”
Next Steps
If you have a dealership or garage business in Kentucky, and have more questions about your insurance program you can give us a call, you can 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.
