Operating an auto dealership can be a lucrative business, but it also comes with numerous risks and liabilities. Having the right insurance coverage in place is crucial to safeguard your investment and ensure your business’s continued success. This article will explore the various insurance requirements, coverage options, costs, providers, and tips for choosing the right auto dealer insurance to protect your dealership.
- 5 best auto dealer insurance companies
- Insurance requirements for auto dealers
- Types of insurance coverage for auto dealers
- How much does auto dealer insurance cost?
- Strategies to lower auto dealer insurance costs
6 best auto dealer insurance companies
We recommend the following 6 auto dealer insurance companies. Each of these providers offers unique advantages for auto dealers seeking insurance coverage. By considering your dealership’s specific needs and priorities, you can choose the provider that best aligns with your business and offers the right combination of coverage, cost, and service.
- Simply Business: Best brokerage firm to compare several quotes from top-tier carriers
- Progressive: Best for garage liability, garage keepers, and commercial auto coverage
- Sentry: Best for customized coverage plans and comprehensive risk management service
- Zurich: Best for the most coverage auto dealer insurance policy of more than 100 years
- Victor insurance: Victor Insurance: Best specialized auto dealer insurance solution and for high-risk auto dealers who may have difficulties finding coverage elsewhere
- Tivly: Best brokerage firm if you prefer working with an independent and knowledgeable agent
Simply Business: Best brokerage firm to compare several quotes from top-tier carriers
Simply Business is a leading insurance brokerage firm that specializes in helping businesses find the right coverage at competitive rates. They offer auto dealer insurance policies from multiple top-tier carriers, allowing you to easily compare quotes and find the best fit for your dealership. Their user-friendly online platform and knowledgeable customer support team make the process of obtaining coverage simple and efficient.
Pros:
- Access to multiple top-tier carriers for easy comparison
- User-friendly online platform for obtaining quotes and managing policies
- Excellent customer support to help navigate the insurance process
Cons:
- Not a direct insurance carrier, which may result in additional fees
- May not have as many customization options as some direct carriers
- Coverage options may vary depending on the carrier
Progressive: Best for garage liability, garage keepers, and commercial auto coverage
Progressive is a well-known insurance provider that offers comprehensive coverage options for auto dealers, including garage liability, garage keepers, and commercial auto coverage. Their extensive experience in the industry, coupled with their strong financial stability, makes them a reliable choice for dealerships seeking robust coverage options. Progressive’s customer service team is available to assist with policy questions and claims, ensuring a smooth experience for their clients.
Pros
- Well-known and financially stable insurance provider
- Comprehensive coverage options for auto dealers
- Accessible customer service team for policy questions and claims
Cons:
- May not have as many customization options as some specialized carriers
- Not a brokerage, limiting options for comparison shopping
- Rates may be higher for certain coverage options compared to other providers
Sentry: Best for customized coverage plans and comprehensive risk management service
Sentry is a well-established insurance company with a reputation for offering customized coverage plans tailored to the unique needs of auto dealers. They provide comprehensive risk management services to help dealerships minimize potential losses and maintain a safe environment for employees and customers. Sentry’s dedicated team of industry experts works closely with clients to ensure their coverage is designed to protect against the specific risks faced by auto dealers.
Pros:
- Customized coverage plans tailored to auto dealers’ unique needs
- Comprehensive risk management services to help minimize losses
- Dedicated team of industry experts to assist with coverage decisions
Cons:
- May have higher premiums for customized plans
- Not a brokerage, limiting options for comparison shopping
- Not specifically focused on auto dealer insurance, which may affect the depth of industry knowledge
Zurich: Best for the most coverage auto dealer insurance policy of more than 100 years
Zurich is a global insurance company with over 100 years of experience providing comprehensive auto dealer insurance policies. Their extensive industry knowledge and experience make them a reliable choice for dealerships seeking robust coverage options. Zurich offers a wide range of coverage options, including garage liability, garage keepers, and commercial auto coverage, ensuring your dealership is well-protected from various risks.
Pros:
- Over 100 years of industry experience and expertise
- Comprehensive coverage options for auto dealers
- Strong financial stability and reputation
Cons:
- May have higher premiums due to their extensive coverage options
- Not a brokerage, limiting options for comparison shopping
- Customer service experiences may vary depending on the region
Victor Insurance: Best specialized auto dealer insurance solution and for high-risk auto dealers who may have difficulties finding coverage elsewhere
Victor Insurance is a specialty insurance provider that focuses on providing coverage solutions for auto dealers, including those considered high-risk. Their expertise in the auto dealer industry enables them to offer tailored coverage options designed to address the unique challenges faced by high-risk dealerships. Victor Insurance works closely with clients to ensure they receive the coverage they need at competitive rates.
Pros:
- Specializes in auto dealer insurance and high-risk dealerships
- Tailored coverage options to address unique challenges
- Competitive rates for specialized coverage
Cons:
- May not offer as many coverage options as larger carriers
- Not a direct carrier, which may result in additional fees
- May not be as widely known as other providers, potentially affecting customer service experiences
Tivly: Best brokerage firm if you prefer working with an independent and knowledgeable agent
Tivly is an insurance brokerage firm that connects businesses with independent and knowledgeable agents who specialize in various industries, including auto dealer insurance. These agents work closely with clients to understand their unique needs and find the best coverage options at competitive rates. Tivly’s focus on personalized service ensures that dealerships receive the attention and expertise they need to make informed decisions about their insurance coverage.
Pros:
- Access to independent and knowledgeable agents specializing in auto dealer insurance
- Personalized service to help clients find the best coverage options
- Competitive rates from a wide range of insurance providers
Cons:
- Not a direct insurance carrier, which may result in additional fees
- Coverage options and quality may vary depending on the agent and provider
- May not have the same level of industry experience as some larger carriers
Tips for choosing the right auto dealer insurance
Assessing your dealership’s needs and risks
Before purchasing insurance, evaluate your dealership’s unique needs and risks. Consider factors such as the types of vehicles you sell, the size of your business, and the potential liabilities associated with your operations.
Comparing insurance providers and policies
Shop around and obtain quotes from multiple insurance providers. Compare the coverage options, limits, deductibles, and premiums to find the best policy for your dealership.
Seeking professional advice
Consult with an insurance agent or broker who specializes in auto dealer insurance. They can help you navigate the complexities of the insurance market and find the right coverage for your business.
Regularly reviewing and updating coverage
Insurance needs can change over time as your dealership grows or evolves. Regularly review your insurance policies and update your coverage to ensure you remain adequately protected.
Insurance requirements for auto dealers
State and local regulations
Auto dealer insurance requirements vary by state and locality. In many cases, states require dealerships to carry specific types and amounts of insurance coverage as part of their licensing process. Be sure to check with your state’s Department of Motor Vehicles (DMV) or other relevant agencies to determine the exact requirements for your dealership.
Licensing requirements
Most states require auto dealers to obtain a dealer’s license, which often includes meeting certain insurance requirements. These may include carrying garage liability insurance, dealers open lot insurance, or other types of coverage depending on the state.
Factors affecting insurance requirements
The specific insurance requirements for your auto dealership may also depend on factors such as the size of your business, the number of employees, and the types of vehicles you sell.
Insurance requirements for auto dealerships vary by state, and the specific coverage types and amounts required depend on state regulations. Here are the insurance requirements for auto dealerships in California, Texas, and Florida:
Insurance requirements for auto dealerships in California
In California, auto dealers are required to have a $50,000 bond, also known as a motor vehicle dealer bond or an auto dealer bond. Additionally, dealers must obtain garage liability insurance with minimum coverage limits of:
- $100,000 per person for bodily injury
- $300,000 per occurrence for bodily injury
- $50,000 per occurrence for property damage
These are the minimum requirements, and dealers may choose to purchase higher coverage limits to ensure adequate protection.
Insurance requirements for auto dealerships in Texas
Texas requires auto dealers to have a $25,000 motor vehicle dealer surety bond. For garage liability insurance, the Texas Department of Motor Vehicles (DMV) recommends, but does not mandate, the following minimum coverage limits:
- $100,000 per person for bodily injury
- $300,000 per occurrence for bodily injury
- $50,000 per occurrence for property damage
Dealers should consult with an insurance professional to determine the appropriate coverage limits for their specific dealership.
Insurance requirements for auto dealerships in Florida
Florida requires auto dealers to have a $25,000 surety bond or an irrevocable letter of credit. Garage liability insurance is also mandatory for auto dealers in Florida, with minimum coverage limits of:
- $25,000 per person for bodily injury
- $50,000 per occurrence for bodily injury
- $10,000 per occurrence for property damage
Alternatively, Florida auto dealers can obtain a combined single limit policy with a minimum coverage amount of $65,000, which covers both bodily injury and property damage.
These are the minimum requirements set by each state, but auto dealerships may choose to purchase additional coverage to ensure adequate protection for their business. It’s important to work with an experienced insurance professional to determine the appropriate coverage for your dealership based on your specific needs and risks.
Types of insurance coverage for auto dealers
On average, auto dealers are exposed to more risks than those in other industries partly because they store and handle expensive products, ie. cars. Below are the common coverages that auto dealers may need:
Garage liability insurance
Garage liability insurance covers property damage and bodily injury resulting from accidents that occur on your dealership’s premises or during business operations.
Property damage
This coverage helps protect your dealership if you’re found liable for damage to someone else’s property.
Bodily injury
Bodily injury coverage protects your dealership if you’re found liable for injuries to someone else, such as a customer or visitor, while they’re on your property or during a test drive.
Is garage liability insurance the same as general liability insurance for auto dealers? Do auto dealers need both?
Garage liability insurance and general liability insurance for auto dealerships are related but distinct types of coverage. While both types of insurance provide protection against liability claims, they serve different purposes and cover different types of risks.
Garage liability insurance is specifically designed for businesses in the automotive industry, such as auto dealerships, repair shops, and service stations. It covers bodily injury and property damage resulting from accidents that occur on the dealership’s premises or during business operations, such as test drives. Garage liability insurance also typically includes coverage for the dealership’s liability arising from faulty workmanship or parts.
General liability insurance, on the other hand, is a broader type of coverage that protects businesses, including auto dealerships, against liability claims for bodily injury, property damage, and personal or advertising injury. While general liability insurance covers many of the same risks as garage liability insurance, it doesn’t specifically address the unique risks associated with automotive businesses.
For an auto dealership, having both garage liability insurance and general liability insurance is essential to ensure comprehensive protection against potential liability claims. The combination of these policies provides coverage for the unique risks associated with auto dealerships and the more general risks faced by any business.
Dealers open lot insurance
Dealers open lot insurance provides coverage for vehicles in your inventory against physical damage.
Comprehensive coverage
This covers damage to your vehicles caused by events other than collisions, such as theft, vandalism, or natural disasters.
Collision coverage
Collision coverage protects your inventory against damage caused by accidents or collisions while the vehicles are in your possession.
Is dealers open lot insurance the same as auto dealer inventory coverage?
Yes, Dealers Open Lot insurance is essentially the same as Auto Dealer Inventory coverage. Both terms refer to insurance policies that provide coverage for physical damage to vehicles held in a dealer’s inventory. This type of insurance is specifically designed for auto dealerships and typically covers damage caused by events such as theft, vandalism, fire, natural disasters, and collisions. Dealers Open Lot insurance or Auto Dealer Inventory coverage helps protect the investment dealers have made in their inventory and ensures they can recover from potential losses due to these events.
Garagekeepers coverage
Garagekeepers insurance is designed to protect auto dealerships and other automotive businesses when they are in possession of customers’ vehicles for service, repair, or maintenance. This coverage is essential for auto dealers who offer repair or maintenance services, as it covers damages to customers’ vehicles while they are under the care of the dealership. Here are two examples to illustrate the coverage of garagekeepers insurance for auto dealers:
Example 1: Damage during repair
A customer brings their vehicle to your auto dealership for an engine repair. While the vehicle is in the repair shop, a technician accidentally drops a heavy tool on the hood, causing significant damage. The customer’s vehicle requires additional repair work to fix the damage caused by the technician.
In this situation, garagekeepers insurance would cover the cost of the additional repairs to the customer’s vehicle resulting from the technician’s mistake. The coverage helps protect your dealership from potential financial losses and ensures the customer’s vehicle is repaired to their satisfaction.
Example 2: Theft or vandalism
A customer leaves their vehicle at your auto dealership overnight for a scheduled maintenance appointment the next day. During the night, a thief breaks into your dealership’s parking lot and steals the customer’s vehicle. Alternatively, the thief could have vandalized the vehicle, causing significant damage.
Garagekeepers insurance would cover the loss or damage to the customer’s vehicle resulting from the theft or vandalism. This coverage helps protect your dealership from financial liability and ensures the customer is compensated for their loss or the cost of repairs.
In both examples, garagekeepers insurance plays a crucial role in protecting auto dealerships from potential financial losses related to damages or losses to customers’ vehicles while under the dealership’s care.
Commercial property insurance
Commercial property insurance covers your dealership’s buildings, equipment, and inventory against damage caused by events such as fire, theft, or natural disasters.
Workers’ compensation insurance
Workers’ compensation insurance is required in most states and helps cover medical expenses and lost wages for employees who suffer work-related injuries or illnesses.
Commercial auto insurance
Commercial auto insurance covers company-owned vehicles used for business purposes and provides liability and physical damage protection.
False pretense coverage
False pretense coverage protects your dealership against losses resulting from fraudulent activities, such as someone posing as a buyer or stealing a vehicle during a test drive.
Errors and omissions (E&O) insurance
E&O insurance covers your dealership against claims arising from mistakes or oversights, such as errors in title or odometer documentation or finance and insurance processing.
How much does auto dealer insurance cost?
Auto dealer insurance cost varies significantly depending on several factors that we are discussing in depth below.
Having said that, the average cost of a garage liability insurance policy of $300K/$500K, which largely satisfies the minimum requirements in most states, is about $95 per month, or $1,140 per year. Most auto dealers pay between $65 to $250 per month for their garage liability insurance.
Keep in mind that these are just the averages. Your rates will be different. Make sure to shop around with a few companies or work with a top broker like Simply Business or Tivly so that they can help compare several quotes to find the cheapest one for you.
Factors affecting insurance premiums
Many factors affect auto dealer insurance costs. Below are some important ones:
Location
The geographical location of your dealership plays a significant role in determining your auto dealer insurance cost. Insurance companies consider factors such as local crime rates, weather patterns, and the overall cost of living in the area when setting premiums. For example, a dealership located in an area prone to natural disasters like hurricanes or floods may have higher insurance costs due to the increased risk of damage to their inventory.
Type of vehicles sold
The types of vehicles your dealership sells can also impact your insurance premiums. High-end, luxury, or performance vehicles may carry higher insurance costs due to their increased value and the potential for larger claims in the event of damage or theft. On the other hand, dealerships selling more affordable, lower-risk vehicles may have lower insurance costs.
Size of inventory
The size of your inventory is another factor that influences auto dealer insurance costs. A larger inventory typically means higher coverage limits are needed, which in turn can result in higher premiums. Dealers with smaller inventories may have lower insurance costs, as the potential financial exposure for the insurer is less significant.
Security measures
The security measures your dealership has in place can directly affect your insurance costs. Adequate security measures, such as surveillance cameras, well-lit lots, and secure fencing, can help reduce the risk of theft or vandalism, leading to lower insurance premiums. On the other hand, a dealership with insufficient security measures may face higher insurance costs due to the increased risk.
Claims history
Your dealership’s claims history plays a crucial role in determining your insurance premiums. A history of frequent or high-cost claims can result in higher premiums, as insurers may view your dealership as a higher risk. Conversely, a dealership with a clean claims history and a strong focus on risk management may be eligible for lower insurance rates.
Coverage limits and deductibles
The coverage limits and deductibles you choose for your auto dealer insurance policy will also impact your premiums. Higher coverage limits provide greater protection but come with higher premiums. Choosing a higher deductible can help lower your insurance costs, but it also means you’ll be responsible for a larger portion of the expenses in the event of a claim.
Each of these factors can influence the cost of auto dealer insurance. It’s essential to work with an experienced insurance professional to determine the appropriate coverage levels for your dealership and find the best possible rates based on your unique needs and risk profile.
Strategies to lower auto dealer insurance costs
To reduce your auto dealer insurance premiums, consider the following strategies:
Implement strong security measures
By implementing strong security measures, such as surveillance cameras, well-lit lots, secure fencing, and alarm systems, you can help reduce the risk of theft or vandalism at your dealership. Insurers may offer lower premiums for dealerships with adequate security measures in place, as these businesses are considered a lower risk.
Maintain a clean claims history
A clean claims history is an essential factor in securing lower auto dealer insurance premiums. By focusing on risk management and taking steps to prevent accidents and losses, you can reduce the likelihood of filing claims, which can result in more favorable insurance rates.
Choose higher deductibles
Opting for higher deductibles can help lower your insurance premiums. A higher deductible means you’ll be responsible for a larger portion of the expenses in the event of a claim, but it also signals to insurers that you are willing to share more of the risk, which can result in lower rates.
Bundle policies
Insurance companies often offer discounts to businesses that purchase multiple policies from the same provider. By bundling your auto dealer insurance with other coverage types, such as general liability, property, or workers’ compensation, you may be eligible for discounts and reduced premiums.
Regularly review and update coverage
As your dealership grows or evolves, your insurance needs may change. Regularly review and update your coverage to ensure you are not over-insured or under-insured. Adjusting coverage limits and eliminating unnecessary coverages can help lower your premiums.
Work with an experienced insurance professional
An insurance agent or broker who specializes in auto dealer insurance can help you navigate the complexities of the insurance market and find the right coverage for your business at the best possible rates. They can provide guidance on risk management, help you identify discounts and savings opportunities, and ensure your dealership is adequately protected.
By following these tips and working closely with an experienced insurance professional, you can take steps to reduce your auto dealer insurance premiums while still maintaining the necessary protection for your dealership.
Conclusion
Having the right insurance coverage in place is essential for the success and protection of your auto dealership. By understanding the various insurance requirements, coverage options, costs, and providers, you can make informed decisions to safeguard your business. Don’t leave your dealership’s future to chance – take action today to ensure you have the proper coverage in place.
