Whether you sell used cars, offer financing, or have a service center, you need insurance coverage that protects your business, inventory, and employees. In this blog post, we’ll explain the key types of insurance coverage smaller car dealerships should consider.
1. Garage Liability Insurance
Garage liability insurance is the foundation of coverage for car dealerships. It protects your business from third-party bodily injury and property damage claims. For example, if a customer slips and falls on your dealership lot or if an employee accidentally damages someone else’s property, this business liability insurance coverage provides financial protection.
Key Features:
- Covers injuries to customers or visitors on your property.
- Protects against property damage caused by your employees or operations.
2. Garagekeepers Insurance
Garagekeepers Insurance is necessary for a car dealership. If you service, repair, or store customer vehicles, you need garagekeepers insurance. This coverage protects vehicles in your care, custody, or control against damage caused by fire, theft, vandalism, or other covered events.
Key Features:
- Covers damages to customer vehicles while in your possession.
- Essential for dealerships with a service department or parking lot.
3. Dealer Open Lot Coverage
This coverage is critical for protecting your inventory of vehicles. Dealer open lot insurance helps pay for damage or loss to the vehicles on your lot due to fire, theft, hail, or other covered events.
Key Features:
- Covers damage to your inventory of vehicles.
- Customizable to match the value of your inventory and risk exposures.
- One for the most common for a car dealership is hail damage. If you have $500,000 in value of vehicle inventory and your lot is hit by hail, your vehicle value has significantly decreased with the damage to the vehicles.
4. Workers’ Compensation Insurance
If your dealership has employees, most states require you to carry workers’ compensation insurance. This policy covers medical expenses, lost wages, and other benefits for employees who are injured or become ill while working.
Key Features:
- Required in most states for businesses with employees.
- Provides financial protection for workplace injuries or illnesses.
5. Commercial Property Insurance
Your dealership likely has a significant investment in its physical location, whether it’s the building, signage, tools, or office equipment. Commercial property insurance covers damage to your property caused by fire, theft, vandalism, or severe weather.
Key Features:
- Protects your building, tools, and office equipment.
- Covers damage from natural disasters or theft.
6. Business Interruption Insurance
Unexpected events, like a fire or severe storm, could temporarily shut down your dealership. Business interruption insurance helps cover lost income and ongoing expenses during this downtime, so you can focus on getting your dealership back to full operation.
Key Features:
- Covers lost revenue and operating expenses during covered events.
- Helps ensure financial stability during disruptions.
7. Cyber Liability Insurance
As dealerships increasingly rely on technology for customer transactions, managing financing, and maintaining records, cyber liability insurance is more critical than ever. This coverage protects your business from data breaches, cyberattacks, and the resulting financial and legal consequences.
Key Features:
- Covers costs related to data breaches and cyberattacks.
- Provides funds for customer notification, legal expenses, and data recovery.
8. Employment Practices Liability Insurance (EPLI)
Employment-related claims, such as discrimination, harassment, or wrongful termination, can be costly for any business. EPLI provides protection for your dealership against these types of claims.
Key Features:
- Covers legal costs and settlements related to employment practices claims.
- Helps protect your business reputation and finances.
How to Choose the Right Coverage for Your Dealership
Smaller car dealerships face unique risks, so it’s important to work with an experienced insurance agency to customize your coverage. When evaluating your needs, consider factors like:
- The size of your inventory.
- Whether you service or repair vehicles.
- The number of employees you have.
- The value of your building and equipment.
- The potential risks in your geographic area (e.g., weather-related risks).