Whether your clients own a motorcycle dealership or sell used cars, insurance coverage is necessary to protect the business and assets. Many options are available for companies that specialize in used vehicles, and the requirements can vary considerably from state to state. So how can business owners tell which insurance plans are right for them?
Understanding the Right Insurance Plan
Here we go over some insurance options that might be suitable given the risk factors inherent in the used vehicles business.
Personal or Commercial Garage Liability Insurance?
Before we go into the different types of insurance for used auto dealerships, let’s go over the differences between personal and commercial liability insurance.
Personal liability is the minimum insurance requirement for all drivers in the United States. Almost every state in the country requires all owners to have this before operating their vehicles. This type of insurance ensures that drivers are covered if they are ever involved in an accident.
But personal liability insurance doesn’t cover vehicles used for businesses. It is why owners of car dealerships need to get commercial liability insurance instead of personal liability coverage. So while they essentially provide the same type of coverage, commercial liability insurance is better suited for used auto dealerships.
Coverage of Commercial Auto Insurance
Commercial auto insurance essentially covers how businesses use their vehicles. There are many instances when a buyer could drive cars outside the lot before purchasing. It would require traveling to another facility for the test drive.
But accidents can quickly occur during these times when they are in the buyer’s possession. For this reason, dealerships need insurance coverage for these vehicles before the owners’ insurance takes effect.
Essential Insurance for Car Dealers
At the very least, auto dealerships should have third-party liability insurance. Whether the owner specializes in motorcycles or used cars, this is the minimum insurance they should have for their vehicles.
Remember, car dealerships require specific policies that provide different coverage than standard personal vehicle insurance or commercial auto insurance. While auto dealers require general business and liability insurance, they also need other insurance to cover specific risk exposures.
Auto dealerships typically need the following:
- Employment practices liability (EPLI). It protects business owners from claims that may be levied against them by employees. It covers harassment, discrimination, wrongful termination, and retaliation.
- Errors and omissions (E&O). It protects businesses that provide advice to their customers as part of their operations. In the case of auto dealerships, this insurance protects business owners from liabilities arising from offering wrong, misleading, or incomplete information.
- Business income. It covers business-related costs resulting from natural and man-made disasters. For instance, businesses can use it to pay for damage repair, payroll, and other expenses due to lost income resulting from a disaster.
- Worker’s compensation. It covers the medical expenses of employees who may file claims after being injured or sick due to performing their duties.
- Garage keeper’s liability. It pays for the expenses that businesses may incur if a customer’s vehicle is damaged while in the dealership’s possession. It usually applies to cars that become damaged while being repaired. Additionally, it works for vehicles that get stolen. Any damages by fire, vandalism, collision, or natural calamity while in the car lot also get the coverage.
- Garage liability. It covers costs arising from fire, property damage, or personal injury that may occur due to the car lot’s normal operations.
- Dealer plate. It covers vehicle and driver liability resulting from incidents while the vehicle is on a test drive.
Like all other businesses, used auto dealerships need insurance to protect the company and the owners’ assets. As you can see, there are many different types of insurance suitable for auto dealers, but not all the examples detailed above may apply to your clients. It is best to discuss the matter more thoroughly with an insurance agent, so they can determine the most appropriate type of coverage and know the specific requirements for their state.
About K2 Insurance 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.
