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UPDATED: Oct 9, 2018
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If you are thinking about starting a dealership, then you need to understand that as a dealership, car insurance is one of the many things that you need to consider for your business.
Interestingly, car dealerships don’t actually need to have car insurance, but the insurance they do need will cover each vehicle.
Whether you are planning on operating a new or used car dealership, you want to ensure that your business is protected if one of the cars on your lot is involved in an accident.
Because a car dealership often sees cars coming and going every day, it is impossible for them to insure each car individually; even fleet insurance can be difficult to maintain.
Because of this, you will not find dealership car insurance coverage from your local insurance company.
Keep reading to learn what type of insurance you will need as a car dealership, how to save money on your insurance premiums, and some questions you should ask of each insurance company before you buy.
Dealership Car Insurance
The law in every state requires that any registered vehicle have car insurance.
However, the cars at a car dealership aren’t yet registered with an owner, even though technically the dealership does own each vehicle.
In this case, a dealership needs to purchase third party liability insurance that includes the vehicles on the property. Property and casualty insurance are usually the two types of insurance a dealership will need in order to get the proper protection for the cars on your lot.
Property and causality insurance covers incidents as a result of accidents, theft, fire, flood and so on.
Included in the property and causality insurance are liability limits that you need to set to ensure that any accident that occurs can be paid for entirely by the insurance company.
When you purchase commercial car insurance coverage for a dealership, you need to ensure that you are specifically purchasing car dealership coverage.
This is important because these policies are designed specifically for the auto dealership industry and include areas that other property and causality insurance coverage doesn’t.
Here are some things that car dealership insurance should cover:
- Vehicles owned by customers that are on your lot for maintenance
- Loaner vehicles
- Non-owned vehicles, which are vehicles that have not yet been purchased but are listed in your system
- Newly acquired vehicles, which are vehicles that are not yet registered in your system but you plan to incorporate into your car lot
- Accidents caused by employees while driving a lot vehicle
- Accidents caused by customers while driving a lot vehicle
- Accidents caused by employees driving customer vehicles (such as testing for maintenance issues)
One of the most common mistakes that both dealerships and their customers make is assuming that having private auto insurance is enough to cover the cost of any accidents that might occur during a test drive.
It is illegal for a car dealership not to have insurance specifically for their car lot.
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Car Insurance Discounts Don’t Apply
You know that when you purchase car insurance, you get discounts based on driving history, the type of car you are driving and so on.
As a car dealership, car insurance discounts just don’t apply. There are, however, other discounts that you can take advantage of.
- Conduct a background check on employees – Insurance companies like it when you do an extensive background check on your employees. This ensures that you don’t hire individuals with a criminal background or with other issues, which will save you money on your insurance.
- Provide mandatory training for employees – Many insurance companies provide you with a list of approved training courses for dealership employees regarding safety with customers and while driving. In addition, some will allow you to develop your own program, which will equal a discount for your company.
- Stick to a test drive route – By requiring that all test drives occur on a pre-determined route, not only do you decrease the risk of accidents due to familiarity, but many insurance companies offer a discount if you do.
- Check driving history of customers – As a dealership, you can run driving background checks on potential drivers; by making this standard practice, insurance companies consider you a lower risk and will reduce your insurance costs.
- Secure your property – Keeping your property safe from theft is very important. The more security features you have, the deeper your discounts will be. Some insurance companies actually require specific security measures in order to insure a car dealership because they are often the target of theft and vandalism.
Taking steps to reduce the amount of claims your company might have will greatly reduce your insurance premiums.
Car Insurance Questions Can Help
Many of the same questions you would ask of your car insurance agent, you should ask your property and causality insurance agent.
You want to ensure that you have the right kind of insurance and the right amount of insurance as well.
Some of the questions that you should ask are:
- How much insurance do I need?
- What discounts do we qualify for?
- What are our premium options?
- Do they specialize in dealership insurance?
- How easy is it to change a policy?
You probably have many of your own questions to ask of a potential insurer, so take the time to make a list before you talk to them either in person or by phone.
In addition, talk to other car dealership owners and ask them who they use and what questions they would ask a potential insurer.
This will ensure that you don’t miss anything.
Your first step should be to get insurance quotes. The reason for this is that you can narrow down your choices. In addition, you will usually find that there are insurance company options that you didn’t consider before.