Car Dealership Insurance

Used car dealerships need protection against lawsuits, vandalism, and other possible threats.

Christine Lacagnina Written by Christine Lacagnina
Christine Lacagnina
Written by Christine Lacagnina

Christine Lacagnina has written thousands of insurance-based articles for by authoring consumable, understandable content.

paul martin Reviewed by Paul Martin
paul martin
Reviewed by Paul Martin

Paul Martin is the Director of Education and Development for Myron Steves, one of the largest, most respected insurance wholesalers in the southern U.S.

Couple having a conversation with a salesperson at a car dealership, all of them standing next to new cars. Find Car Dealer Insurance.

Car dealerships are unique businesses with a variety of risks to consider on a daily basis. The inventory on a car lot is highly valuable and vulnerable to the elements, as well as theft and vandalism. In addition, your products are likely to be frequently driven on public roads by customers, as well as tested, touched, and manipulated in any number of ways. Further, your dealership probably has vehicles belonging to others on your property for repair or storage purposes. 

All of these concerns must be addressed with business insurance that's tailored for car dealerships. A local independent insurance agent can help you get the coverage you need. However, first, we'll break down car dealership insurance and why it's necessary.

Commercial Property Insurance Considerations for Car Dealerships 

Car dealerships have a variety of property risks that can be mitigated with business insurance. Like most businesses, car dealers likely have a main building and other valuable property that needs to be protected with commercial property insurance. In addition, they face property risks associated with inventory and their interaction with customers and the general public. 

Your inventory can be damaged in various ways, from windstorms and hail to vandalism and customers testing and interacting with the vehicles on your lot. Weather is one of the most serious concerns for your inventory. If one vehicle gets damaged in a hailstorm, chances are that every vehicle on your lot could sustain damage. 

Having the general public on your lot is how you sell your product, and unfortunately, a great deal of risk comes with the territory. Customers want to look at the interior and exterior of the vehicles, touch and test the equipment, and go for test drives. 

There are an endless number of ways the cars on your lot could get damaged by customers or other hazards. However, having commercial property insurance could help reimburse your business for related losses. 

Commercial General Liability Insurance Considerations for Car Dealerships

Car dealers face a variety of unique liability risks associated with different activities that take place at the business and involve its products. Just a few to consider include:

  • Test drives: Customers who test-drive your vehicles out on public roads pose a great threat to other drivers and their vehicles. People driving unfamiliar vehicles can be involved in an accident that results in property damage, injury, or death, and you, as the business owner, can be held responsible.  
  • Faulty repairs: If you or your employees cause damage to someone else’s vehicle that's in your possession or perform a faulty repair that leads to injury or death, you can be held liable. 
  • Catastrophic events: Fire, smoke, or other catastrophic events can damage customer vehicles in your possession for repairs or service. You could be held liable for property damage to other people’s property that's in your care. 
  • Product liability: A car with a safety problem or some other type of malfunction can cause property damage or injure someone. You can be held liable in these cases. 
  • Customer injuries: If a customer so much as slips and falls in your dealership, you could end up with a lawsuit on your hands. 

Fortunately, having commercial general liability insurance can help reimburse businesses for the cost of lawsuits related to any of these incidents. An independent insurance agent can help you get equipped with this coverage.

What Kind of Insurance Does a Car Dealership Need?

The insurance industry has developed a special set of policies or packaged policies uniquely designed for car dealers. Used car dealership insurance covers your inventory, service work on non-owned vehicles in your possession, negligent or faulty work on vehicles, liability for vehicles out on the road, and much more. Here are some basic business insurance policies most dealerships need:

  • Commercial general liability insurance: This provides broad coverage for third-party claims of bodily injury and personal property damage caused by you or your employees. It also covers claims related to slander, libel, and advertising liability, as well as losses or injuries to a user, buyer, or bystander caused by a defect or malfunction of a product. 
  • Product liability insurance: This provides coverage for the manufacturer or seller of the product for defective design and “failure to warn,” which is a type of claim that can arise if a business or manufacturer didn't properly demonstrate or advise the public on how to properly and safely use its product. 
  • Commercial property insurance: This provides protection for your commercial property, including buildings, inventory, and contents. 
  • Business interruption coverage: This provides coverage for lost income and expenses if you must temporarily cease operations after a catastrophic event. It pays employee salaries, rent, and other expenses while the business is closed to make repairs.

You'll also likely need the following types of coverage and others, depending on your needs and the specifics of your business:

  • Employee dishonesty coverage: This covers business losses due to incidents of employee theft and crime.
  • Professional liability insurance: This provides protection for lawsuits related to odometer, truth in lending, and title-related claims.
  • Garagekeepers liability coverage: This covers customers’ vehicles in your care, custody, and control (e.g., for repairs or service).
  • Inland marine coverage: This helps protect against losses related to damaged, stolen, vandalized, or destroyed vehicles and other company property while it's in transit.
  • Workers’ compensation insurance: This protects businesses against losses related to employees who get injured or ill on the job or because of job duties.
  • Auto dealer physical damage coverage: Also called "dealer's open lot insurance," this covers your inventory or vehicles held for sale.
  • False pretenses coverage: This protects your business if you get tricked into releasing a vehicle to someone under false pretenses.

Car dealers looking to find appropriate business insurance coverage should work with a knowledgeable independent insurance agent who specializes in their line of work. The right agent can find individual and packaged car dealer insurance policies that will address the various forms of property and liability risk inherent in your business. 


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How Much Does Used Car Dealership Insurance Cost? 

Car dealers need a customized mix of commercial property and liability insurance to ensure there aren't any gaps in coverage. The cost to cover your car dealership with a comprehensive business insurance program can vary depending on: 

  • The size of your business
  • Your business's location
  • The number of employees you have
  • The products and services you provide
  • The value of your commercial property, including your building and all of its contents
  • The value of your vehicle inventory
  • The types of coverage in your policy and its coverage limits 
  • The crime and weather risks in your city

An independent insurance agent can work with you to determine the types and amounts of coverage your dealership needs. Your agent can help find exact quotes from multiple insurance companies so you can evaluate the cost and coverage options and make the right choice for your business. 

The Benefits of Working with an Independent Agent

Independent insurance agents help simplify the process of finding the right car dealership insurance. They’ll walk you through the handpicked policy options and explain the details. They shop and compare quotes from multiple local carriers for you, only presenting you with the options that offer the best blend of coverage and cost.

Most importantly, they’ll be there for you when claim time comes. They know the ins and outs of the process and will make sure your claim is handled appropriately. They'll also be there if it ever comes time to update or change your coverage down the road.

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