Insurance For Used Car Dealers
Even used car dealers need to think about insurance, because as long as the cars are in their possession they are responsible for everything. The limits and types of insurance that apply to used car dealerships may not be the same in every state, but what’s generally known is that the insurance for used car dealers is expensive.
The main reason why this type of insurance is so expensive is because no insurance company is able to determine the type of customer that will ask to test drive the car. As a result, the cost of liability coverage is higher than that involved by regular insurance policies. For example, in the state of Illinois, a car insurance policy for a used car dealer must include a minimum level of liability of $100,000 in case a single person is injured as result of an accident, of $300,000 in case of a multiple victim accident and of $50,000 for damaged property.
In the case of insurance for used car dealers we can talk about garage liability that is important because it offers protection against accidents that may happen in the storage area and against car accidents on the open road. Usually, the garage liability includes the auto liability that’s mandatory in every state and is set at certain minimums I’ve already explained above in the case of the state of Illinois. Another type of coverage that any used car dealer should consider buying is that which refers to open lots. This is mostly related to the traditional comprehensive and collision coverage. It’s meant to cover the damages produced, for example, by the collision of a dealer’s car with an object and the damages produced by natural phenomenon such as fire, theft or flood and even vandalism. The limits set for this type of coverage can be specified per vehicle. When setting the limit, the used car dealer should think about the percentage of luxury cars it has in his lot, because a $15,000 limit per vehicle may not be enough for such an expensive car.
An insurance policy for used car dealers usually also includes a coinsurance clause. This clause details the process which is followed in case of a partial loss. You can be fully covered or not. For example, if the coinsurance is set at 90%, in case of a partial loss, if the car dealer wants the insurance company to cover all the damages, he will have to have coverage on the Dealer Open Lot that represents 90% or more of his current fleet’s value. This is a clause meant to affect those who want to pay less for insurance. Even if a lower coinsurance percentage may be favorable for a dealer’s business, the risks involved need to be carefully evaluated, especially if the dealerships stores many expensive vehicles.
Another type of coverage a dealer can include in his policy is the garage keeper liability. This coverage is recommended for dealers that offer repair services on cars other than their own. It’s similar to the dealer open lot coverage, but applies to a different category of vehicles. Also wise to purchase is the false pretense coverage. A used car dealer may find this coverage useful if he is scammed. For example, if during an approved test drive the client steals the car, the insurance company will cover the losses.
Besides the coverage necessary for protecting its cars, a used car dealer should also be interested in business related insurance which can focus on employee dishonesty, robbery or business interruption. The only drawback is the high cost involved.
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