Car Dealership Business Insurance
Getting insurance for your car dealership is essential.
Car dealerships need to be protected against things like claims of violations of lemon law, fraud, misrepresentation, and contractual breaches.
For example, your dealership accidentally sells a customer a defective car, or an employee misrepresents the quality of a used car to a customer.
We’ll help you find the most personalized and affordable coverage for your unique business.
Recommended: Next Insurance is dedicated to matching small businesses with the right policy at the best price.
Best Insurance for a Car Dealership Business
General liability insurance is — generally speaking — one of the most important insurance policies for car dealerships.
Some of the risks general liability insurance covers are:
- Bodily injury
- Property damage
- Medical payments
- Legal defense and judgment
- Personal and advertising injury
It is common for car dealerships to get additional policies that supplement the protection offered by general liability. Some of these include:
- Commercial property insurance
- Workers’ compensation insurance
- Commercial umbrella insurance
- Business interruption insurance
You are typically presented with two distinct categories of insurance providers when shopping around for business coverage. These are:
- Traditional brick-and-mortar insurers — Describes providers such as The Hartford and Hiscox.
- Online insurers — Describes providers such as Tivly and Next.
We advise choosing online insurers over brick-and-mortar ones as they are better able to provide their customers with high-quality, accurate insurance at a more affordable price thanks to their lower operating costs.
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Cost of General Liability Insurance
The average car dealership in America spends between $450-$1,000 per year for $1 million in general liability coverage.
Compare the average cost of general liability insurance for a car dealership business to other professional industries using the graph below.
Several factors will determine the price of your policy. These include your:
- Location
- Deductible
- Number of employees
- Per-occurrence limit
- General aggregate limit
You may be able to acquire general liability insurance at a discounted rate by purchasing it as part of a business owner’s policy (BOP) rather than as a standalone policy.
A BOP is a more comprehensive solution that includes multiple forms of coverage, such as business interruption and property insurance.
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Common Situations That General Liability Insurance May Cover for a Car Dealership Business
Example 1: A customer is walking across the lot and does not see an obstacle. He falls and breaks his arm. Your general liability insurance policy will pay for the medical treatment for his injuries so your company does not have to.
Example 2: An employee is moving a car from one area of the lot to another when he accidentally hits a customer who is car shopping. Although the speed of the vehicle was not high, it still causes the customer significant injuries both from the impact with the car and the impact with the ground. The customer files a lawsuit against your business. Your general liability insurance policy will cover the fees associated with the lawsuit, including a settlement if the case is settled out of court.
Example 3: The new advertising campaign you paid for goes after the competition pretty fiercely, which causes your competitor to sue your business for libel. The general liability insurance policy you carry will pay for your legal costs whether you win or lose the case. It will also pay for a settlement if you settle the case outside of court.
Other Types of Coverage Car Dealership Businesses Need
While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some of the most common types of coverage:
Commercial Property Insurance
The value of your commercial property is substantial. If an unexpected disaster occurs, such as a major storm or fire, and that disaster destroys some or all of your automobiles, it may be enough to put you out of business. As the owner of a car dealership, you should carry commercial property insurance with limits high enough to account for the high value of your inventory.
Workers’ Compensation Insurance
Carrying workers’ comp insurance is an important part of being an employer, and most states legally require it. Not only does carrying this insurance keep you in legal compliance, but it also ensures that your employees can get the medical care they need for any job-related injuries. Your workers’ comp policy will cover both medical care and lost wages if employees are unable to work due to their injuries.
Commercial Umbrella Insurance
Commercial umbrella insurance sits on top of a general liability insurance policy, picking up where the limits of the general liability policy left off. In a situation where your general liability policy limits are exceeded, such as if you lose a major lawsuit, you can depend on the umbrella policy to take over and pay the damages until the limits of the umbrella policy are reached.
Business Interruption Insurance
If a major event causes your business to shut down for a period of time—like after a tornado or other major disaster—then business interruption insurance would help to cover your business expenses and potential lost income during the downtime.
Additional Steps To Protect Your Business
Although it’s easy (and essential) to invest in business insurance, it shouldn’t be your only defense.
Here are several things you can do to better protect your car dealership business:
- Use legally robust contracts and other business documents. (We offer free templates for some of the most common legal forms.)
- Set up an LLC or corporation to protect your personal assets. (Visit our step-by-step guides to learn how to form an LLC or corporation in your state.)
- Stay up to date with business licensing.
- Maintain your corporate veil.
Car Dealership Business Insurance FAQ
Yes, absolutely. You will need to first get a quote from an online business insurance provider like Next Insurance. Next allows you to then purchase a policy immediately and your coverage will be active within 48 hours.
A typical business owner’s policy includes general liability, business interruption, and commercial property insurance. However, BOPs are often customizable, so your agent may recommend adding professional liability, commercial auto, or other types of coverage to your package depending on your company’s needs.
"Business insurance" is a generic term used to describe many different types of coverage a business may need. General liability insurance, on the other hand, is a specific type of coverage that business owners need to protect their assets.
Yes, absolutely. Even when your car dealership is not mandated by law to obtain certain policies before starting (e.g., commercial auto insurance), it is crucial to launch your business successfully.
Furthermore, due to the variety of risks faced by your car dealership, business insurance is necessary for it to be able to operate unrestrained from the financial consequences of these risks.
Not necessarily. Certain exceptions may be written directly into your car dealership business insurance policy, and some perils may be entirely uninsurable.
Yes, an LLC is meant to create a legal barrier between your business and your personal assets and credit. If you haven’t formed an LLC yet, use our Form an LLC guide to get started.
An LLC doesn’t protect your business assets from lawsuits and liability– that’s where business insurance comes in. Business insurance helps protect your business from liability and risk.