Under Reporting – Money Saver or Suicide?
A used car dealer told me that he was reporting a certain amount of inventory with his agent that was much lower than his actual inventory amount. He thought that he was saving money by paying for less inventory. Whoa! This is no place to cut corners. The problem with this is called “Co-insurance.” Co-insurance states that if auto dealership inventory is underreported by more than ten percent, when a claim is submitted the claim will be paid minus the percentage that was underreported.
10% Underinsured – Insurance Company pays 90% of loss
20% Underinsured – Insurance Company pays 80% of loss
30% Underinsured – Insurance Company pays 70% of loss
40% Underinsured – Insurance Company pays 60% of loss
Minus the deductible.
Do you have an auto dealer insurance policy and a personal auto insurance policy? A lot of dealers don’t have to. Your dealer policy has liability coverage for lawsuits. It can also have all of the following: Comprehensive and collision coverage for your inventory and your personal cars for most dealers. Uninsured motorist coverage for your medical bills. It can waive your deductible if you are hit by an uninsured motorist and a lot more. Many used car dealers don’t have a personal auto policy. We can help you structure your coverage to save you as much money as possible.
Unaccompanied Test Drive Thefts
If your policy has unaccompanied test drive liability coverage are vehicles stolen on unaccompanied test drives covered? No. To keep our lawyer happy we have to say “not with any company we’ve ever heard of.” In the event of an auto accident liability coverage helps prevent you from being sued. It covers damage to the property of others and medical bills. Liability coverage does not cover your car. Comprehensive & Collision covers your car. Unaccompanied test drive liability coverage is just that. Liability coverage, not comp & collision. “False Pretense coverage” covers cars that you are tricked out of. The companies that offer unaccompanied test drive coverage don’t offer it on policies that include False Pretense coverage.
Hard To Insure
Have you been told that your auto dealership can’t be insured? We have companies that will cover dealers with any of the following: new in business, salvage title car dealers, exporters, motorcycles, RVs, trailers, big rigs and of course claims.
Bond Premiums Continue To Go Down
Dealers in the car business for ten years or more remember bonds skyrocketing during the financial crisis. At first they stayed high. Then they came down slowly. Well, bond prices are better now than they’ve ever been. Have you shopped your used car dealer bond lately? Don’t pay too much. We work with multiple surety companies to help you save money.
Nobody covers that… right? Sometimes. If you are given a check written on a closed account, or sell a car and identity fraud was used. There is coverage available. “False pretense / trick and device” is an option for exactly this. Coverage for this is actually very inexpensive.
Garage Keeper’s – I Don’t Have A Repair Shop
The term “garage keepers” almost sounds like repair shop insurance. It’s not. GKLL or “Garage Keepers Legal Liability” coverage is an option that covers a risk that almost all used car auto dealers are exposed to. GKLL covers vehicles in your care, custody and control that you don’t own. It covers cars that you are driving to establish trade in value and vehicles that you are driving to determine if a customer’s complaint about a sold vehicle is valid. Last it covers vehicles on consignment to you. Almost all car dealers drive cars before they buy them. Almost all dealers have customer complaints about vehicles from time to time. Some dealers take cars on consignment. This is an important, inexpensive, coverage that almost all dealers need.
“The Tow Company has Insurance, So I’m OK, Right?”
Maybe. Tow companies, auto transport companies, mechanics, body shops and detail shops are usually insured. If the company that has your vehicle in their “care, custody and control” has Garage Keepers coverage you should be fine in the event of a loss. There are factors that can get in the way. Underinsurance due to low coverage limits or catastrophic loss, non-payment of insurance premium (temporary lack of coverage at the time of loss.) Loss due to a condition not covered. Dealers Open lot/Inventory coverage usually takes secondary liability in these situations. If their insurance company isn’t covering you, your dealer insurance company usually is. This should always be clarified with your agent.
Is My Tow Dolly or Tow Truck Covered?
If you list it as a “scheduled vehicle” it’s covered and so is your inventory sitting on top of it. Does this coverage extend to vehicles I tow “for hire?” NO. This coverage excludes tow for hire. It is only available for dealers transporting their own inventory
Other Than Passenger Car Coverage
Do you sell vehicles other than passenger cars and light duty trucks? Do you occasionally take them in trade? RVs, motorcycles, trailers, medium duty and big trucks… Can these be included in your dealer insurance policy? Not all used car dealer insurance companies will cover them. We have carriers that covers all of these. You can put all of them on your dealer policy with Motor Dealer Services.
Can I Put My Dealership And Repair Shop On The Same Policy?
Not with all auto dealer insurance companies. Some companies that insure car dealers will not cover dealers that also perform repairs for the public. Most companies that insure repair shops will not cover shops that sell cars. Having two policies is almost always far more expensive than insuring both of these on one policy. We have carriers that will help you save money by covering both of these on one used car dealer insurance policy.
Comprehensive vs. Specified Perils
For dealers that want the most complete used car dealer insurance policy possible, with the least exposure possible, Comprehensive is the only way to go. I have seen quotes that list “comprehensive” on the proposal and then give a list of covered perils. Comprehensive is an “all risk” / “open perils” policy. It covers everything that is not on the exclusions list. Specified perils policies cover only the perils specified in the list. Typically the perils specified are: theft, wind, hail, aircraft, riot, vandalism, explosion and smoke. Here are some examples of things not covered by a specified perils policy. Tree limb falling on a vehicle, building collapse, sink hole, flood, etc. If you are looking for the most complete auto dealer insurance policy possible, don’t be misled.
Impossible To Insure? No!
Do you sell salvage title vehicles? Have you been told that you can’t get used car dealer insurance? You can. We have a company that covers dealers that sell salvage title vehicles. We can get it covered for you. Are you new in business? Have you been told that you need three years in business to get covered? That’s ridiculous. We can get you covered. Have you been told “No”? We can help. Have you been told that you can’t put your personal cars on your dealer policy? With some companies that may be true. We have companies that allow you to put your personal cars on your dealer policy helping you save a small fortune.
Flooring Companies and the Right Inventory Coverage
Don’t make this simple mistake. Flooring companies typically require that you have enough coverage to cover either 50% or 66% of your credit line (varies by company.) That is the flooring company’s minimum requirement. The used car dealer insurance companies require that 100% of your inventory is covered. If 100% of your inventory is not covered the insurance companies are allowed to underpay a claim by the same percentage the inventory was underreported. See our article “Underreporting Money Saver or Suicide” (above) for a detailed explanation.
Where Did My Insurance Company Go?
Zurich, Wesco, Pacific Specialty, HDI Global, Praetorian, Crusader, Clarenden National, State National, TOPA and Starr Indemnity all left the auto dealer insurance market. We hear that losses made it unprofitable for each of them to do business here. Did your insurance company disappear? We work with multiple used car dealer insurance companies to save you money. We shop your insurance based on your business model and your location to place you with the company with rates best for you.
Have you hired new employees since you wrote your used car dealer insurance policy? Do you have more inventory (or less inventory) then you did when you wrote your policy? Do you have limits that are unnecessarily high? Are you doing everything reasonable to keep your premium low while maintaining the proper coverage to avoid problems? A quick auto dealer insurance review can make sure that you are saving every penny possible. Call us any time for a car dealership insurance review. We can usually do it on the spot.
Do you take vehicles on consignment? Are a lot of your vehicles on consignment? Are a small percentage of your vehicles on consignment? Do you know your used car dealer insurance company’s guidelines regarding what is acceptable? We represent an auto dealer insurance carrier that allows up to ninety percent of dealer inventory to be consigned.
Not Quite Stolen Vehicles
If a customer tricks you into voluntarily giving him the keys to a car, he leaves and you never see him again, can you report it stolen to the police? Can you turn in a stolen vehicle claim with your retail / wholesale used car dealer insurance company? In both cases, NO. A crime has obviously been committed. But that crime is not Grand Theft Auto. It is embezzlement. Is there a way to insure against this? YES. “Trick and Device/False Pretense” coverage can indemnify you from this type of loss. Not all insurers offer this coverage. We have dealer insurers that do.
Title Problems / Mileage Problems
If you sell a car in good faith, your title says 45,000 miles and the customer is issued a title that says “True Miles Unknown” or “Mileage Exceeds Mechanical Limits” and your customer sues you, will your insurer defend you in court and pay damages? What about branded titles? Your title is clean, but the customer gets a title branded “Salvage” or “Flood” etc. If you are sued, will your insurer defend you and pay damages? Maybe. If you have Errors and Omissions for Title, Mileage and Truth in Lending coverage the answer is YES.
The Kitchen Sink
For dealers that want the most complete retail / wholesale used car dealer insurance policy available you can get coverage that covers all of the following: accounts receivable, valuable papers and records, computer & telephone hardware, fire department service charges, signs, building glass, sewer back up, pollutant clean up, fire suppression system recharge and debris removal. Some insurance companies offer this very inexpensive coverage to used car dealers with building coverage.
Is there information here that your agent didn’t tell you?
Did it cost you money?
We hope not.
Dave Hoffman – Broker / Owner