Your clients probably already know they need to have insurance if they plan to open a used auto dealership. Insurance against theft, fire, flood, and other risks is par for the course when running any business.
But auto dealerships have some unique aspects that require the coverage Aegis Specialty Dealer Division provides. Although fire and theft insurance provide essential protection for the business and its assets, it may not cover the risks that used auto dealerships typically face.
So, what type of insurance does an auto dealership need? In a nutshell, used car lot owners will benefit from the following:
- Garage Liability
- Crime
- Acts, Errors and Omissions
- False Pretense
- Dealers Open Lot
These provide a good range of coverage that should sufficiently protect a used car business and its assets. Of course, owners of used car dealerships can include other types of coverage if they wish. But these generally provide adequate protection against losses and damages, as well as potential liabilities.
Why used auto dealerships need insurance
Why does a used auto dealership need insurance? And just as importantly, why should they get insurance that is specifically tailored to their business?
Standard insurance plans provide only a limited degree of coverage, sometimes with policies that may not be relevant to the automotive industry. So although it might seem that any insurance is better than none, this isn’t necessarily the case.
By opting for standard insurance, your clients could miss out on valuable coverages that will protect them from risks inherent in the industry. Therefore, they could end up paying for coverage that they don’t need while not getting the necessary protection from risks they will likely encounter.
Potential risks faced by used auto dealerships
To better understand why used auto dealerships need insurance specific to their industry, let’s take a look at some of the risks these businesses typically face:
- Garage Liability Covers incidents such as slip and falls on the premises, auto accidents and products and completed operations such inadvertently forgetting to replace the oil after an oil change.
- Garagekeepers exposure. Incidents related to a customers vehicle in your care, custody or control
- False Pretense – The voluntary parting of a vehicle held for sale (i.e. a customer requests a test drive and you do not go the drive with them and they never return)
Essential insurance coverage for used auto dealerships
Keep in mind that your clients won’t need every type of coverage available. Insurance policies that may be indispensable to financial institutions or corporate offices may not be useful to used auto dealerships.
As an insurance agent, it is your responsibility to inform and educate your clients on what type of insurance they need. Here are some essential coverages that no used auto dealership should be without:
Garage Liability
Garage Liability (Typically written on “Auto Dealers Coverage Form” for an auto dealer) is a combined policy form which includes elements of a general liability policy and an auto liability policy combined into one coverage offering. It covers auto accidents, products/completed operations, Dealers Open Lot, Garagekeepers Coverage and acts, errors or omissions.
Crime
Crime insurance protects businesses from losses or damages resulting from a criminal act. If cash, valuables, company assets, or cars are stolen from your clients’ used car lot, for example, crime insurance will cover the cost of replacement.
This type of insurance also covers claims of loss or damage made against your client’s company. For example, if an employee steals something from a customer or another firm, this type of insurance will cover the cost of reimbursement and legal fees.
Acts, Errors, or Omissions
Used auto dealers are in a unique situation where they are selling a pre-owned auto that may not be in the pristine condition. Many assume that sellers typically utilize a VIN verification and accident lookup service to identify concerns. Sometimes these services do not provide information on the auto. For example, the odometer may have been tampered with and a customer may purchase a vehicle where the odometer reading may be different than shown. Obviously a car with 220,000 miles is worth less than an auto with 20,000 miles. A dealer can be held responsible for not properly identifying items like this. Having proper coverage for acts or errors or omissions is a must have for a used auto dealer.
Conclusion
Used auto dealerships need all the protection that a comprehensive insurance plan provides. By helping your clients choose the most appropriate plan for their needs, you can help provide them with the coverage they need to protect their business against risks and potential liabilities.
About Aegis Specialty Dealer Division Services
Your used auto dealership clients will benefit considerably from the risk protection that K2 provides. Apart from the full range of insurance coverages, K2 also offers an ACH payment system that bills your clients directly. Call us today at (866) 429-1638 to find out how you can partner with the leading name in auto dealership insurance.
