Business Insurance for Auto and Car Dealerships
Why is insurance a must for auto dealerships?
Your vehicle inventory represents a huge investment—and one that's uniquely vulnerable to losses from storms, fires, and theft. Business insurance covers costs if a hailstorm damages the cars on your lot, or if a thief makes off with a luxury car. It also pays for legal defense costs if a client accuses you of negligence, and some policies are required by law.
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6 insurance policies every auto dealer should consider
These insurance products protect against common risks faced by auto dealers.
General liability insurance
A general liability policy defends against third-party lawsuits, such as a customer who slips on a freshly waxed floor in your showroom and breaks their wrist. It's often required for a commercial lease.
- Customer bodily injuries
- Customer property damage
- Defamation and copyright lawsuits
Business owner's policy
Car dealers can often bundle general liability insurance and commercial property insurance together in a business owner's policy, or BOP, to save money.
- Slip-and-fall injuries
- Stolen or damaged business property
- Business interruption coverage
Commercial auto insurance
Almost every state requires commercial auto insurance for a dealership's vehicles that are used for business. It covers costs in the event of an accident involving your business vehicle.
- Legal fees from an auto accident
- Property damaged by your vehicle
- Vehicle theft and vandalism
Workers' comp insurance
Workers' compensation insurance protects car dealership employees and sole proprietors from work-related medical bills that health insurance won't cover. Most states require this coverage for employees.
- Medical expenses for injured employees
- Disability benefits
- Legal costs from workplace injuries
Cyber insurance
Cyber liability insurance helps cover costs when a car dealership is affected by a data breach or cyberattack. It's also called cybersecurity insurance.
- Customer notification costs
- Data breach investigations
- Fraud monitoring services
Commercial umbrella insurance
An umbrella policy boosts the coverage of a dealership's general liability insurance, commercial auto insurance, or employer's liability insurance once the limit is reached on a claim.
- Customer injury lawsuits
- Auto accident lawsuits
- Workplace injury lawsuits
Car dealership insurance costs
From our customer data, here's a quick look at average insurance costs for auto services and dealerships:
General liability: $54 per month
Business owner's policy: $145 per month
Workers' compensation: $148 per month
Factors that can influence your premiums include:
- Types of vehicles sold at your dealership
- Services you offer, such as auto repair or loaner cars
- Number of employees
- Value of your business property
- Business structure, such as LLC or freelancer
- Additional insureds and other add-ons
- Policy limits and deductibles
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Common questions about auto dealership insurance
Review frequently asked questions (FAQs) for your profession and learn about new car dealer insurance and used car dealer insurance.
What is auto dealer's insurance and why it is important?
Auto dealer's insurance is a broad term. It refers to several types of insurance for car dealers, such as:
- Dealer's open lot (DOL) insurance pays for losses if the vehicles on your lot are damaged. It can cover everything from fires and storms to vandalism, theft, and collisions during a test drive. As with auto insurance, you can choose options like physical damage coverage, comprehensive coverage, and more.
- Garage liability insurance is basically general liability insurance for your garage. It covers incidents like a customer slipping in a puddle of oil, or catching their expensive purse on a piece of machinery in your repair shop.
- Garage keepers insurance covers customer vehicles at your dealership, such as any consigned cars on your lot. It'll pay for repairs or replacement if a vehicle you don't own is damaged or stolen while in your care.
- Dealer plate insurance covers vehicles with dealer plates while they are taken on test drives or moved to another location. It provides liability protection in the event of an accident, along with coverage for physical damage and theft.
What other types of insurance coverage do car dealers need?
Auto dealers often invest in additional insurance policies as part of a comprehensive risk management plan.
Here are some other types of coverage to consider:
- Errors and omissions insurance (E&O): E&O insurance covers legal costs if your dealership is sued for negligence, such as a mistake or oversight in a sales contract. It's sometimes referred to as professional liability insurance.
- Business interruption insurance: A business interruption policy covers lost income and operating costs if your dealership is forced to close temporarily due to a fire or extreme weather. It's also called business income insurance.
- Surety bonds: A surety bond provides a financial guarantee that your dealership will comply with regulations and fulfill the terms of its contracts. Many states require an auto dealer bond, a type of surety bond, in order to get your dealer's license.
- Employment practices liability insurance (EPLI): An EPLI policy pays for legal costs related to violations of an employee's rights, such as an accusation that someone was fired because of their age or gender.
How can auto dealerships save money on business insurance?
Here are four ways to lower costs on your dealership's business insurance policies:
- Pay the full annual premium. Insurance companies usually offer a discount when you pay the full annual premium, as opposed to monthly payments.
- Bundle policies for a discount. Small business owners can often bundle insurance policies to save money. The most popular option is a business owner's policy, which bundles general liability coverage and commercial property coverage.
- Reduce your risks. By focusing on safety and security at your dealership, it's possible to avoid incidents and claims—which helps keep your premiums low.
- Customize your policies. You can choose lower limits or higher deductibles to lower your policy premiums, or opt out of expensive coverage options like comprehensive insurance.
