Car Dealer Insurance Tips for New & Used Car Dealerships

Car dealership insurance is necessary when running an auto dealership business. While comprehensive commercial insurance can be enough to protect you against some perils, it doesn’t provide adequate cover for a specialised business such as yours.

Whether it sells new or used vehicles, a car dealership needs specialised business insurance policies. Dialdirect is dedicated to providing you with all the business insurance information you need to make an informed choice.

Two of the most frequently asked questions are: Does a car dealership need insurance? And secondly: What types of business insurance are relevant to it? This article will provide you with these answers!   

Why does an auto dealer need insurance?

It doesn’t matter how big or small your car dealership is; you’ve invested in staff, property and vehicles. To stay competitive in the modern and changing vehicle industry, you need to protect your car dealership assets from loss or damage.

There are real risks to your car dealership. For example, theft can happen anytime, especially considering that more than 30,000 vehicles are hijacked annually in South Africa.[1] Having car dealership insurance can protect you if you face unforeseen incidents like theft, loss, or damage due to perils like natural disasters and fire.

Besides protecting your assets, a car dealership insurance policy provides essential benefits, including the following:

• Access to commercial building leases: Commercial landlords want to protect their investments. That’s why they often want to lease their buildings to businesses with the right business insurance types. Many commercial building landlords will want to do business with you if you have insurance policies like commercial property insurance or public liability insurance. 

• It can pay for lawsuits: No matter how careful you are, some risks just can’t be avoided. For example, a customer or supplier might be injured at work and sue you. Armed with car dealership insurance, you’ll be able to cover the legal costs incurred in defending yourself.

• Peace of mind: Best of all, having car dealership insurance gives you peace of mind. Not only will this make you feel less stressed about risks that are beyond your control. Discover how having the right business insurance can help you grow your car dealership.

The 6 types of car dealer insurance you may need

A car dealership doesn’t have to insure every car in the showroom or parking lot. There are various types of car dealership insurance that include their vehicles. Since no one car dealership insurance policy can cover all aspects of every auto dealer’s business, several types of insurance policies are often required. You need to tailor your auto dealer insurance to fit your specific business. 

Here are six types of business insurance covers you may need:

1. Business Interruption Insurance

Your car dealership operations might be interrupted due to various factors, including cyberattacks, theft or damage to property of some sort. You can’t eliminate these potential risks. How can you ensure that you keep generating income during difficult times? The solution is to have business interruption insurance.

This type of insurance protects your car dealership against loss of income due to unfortunate events. With the proceeds from the insurance, you’ll be able to keep paying your employees, relocation costs (where needed) or pay rent or mortgage, amongst others.

2. Public liability insurance

This type of business insurance pays out in case a member of the public successfully sues for injury, property damage or death due to your business activities. Your car dealership often interacts with potential customers, suppliers and visitors.

Any one of these individuals faces various risks when at your premises. For example, an unattended piece of equipment could inadvertently injure a supplier. This person may require medical attention or even surgery. In addition, you can’t rule out the possibility of a lawsuit against you for the injury.

In cases like these, public liability insurance will pay out for medical costs and legal expenses — meaning that the bottom line of your car dealership remains protected.

3. Commercial auto insurance policy

Few car dealerships could run effectively without using cars. For most, cars are essential for various functions, including attending networking events, delivering number plates to customers and meeting potential customers.

It goes without saying that such vehicles are exposed to risks on the road, which is why you need a business auto insurance policy. Since profits can be tight in an auto dealership business, this type of insurance can protect your bottom line.

Commercial auto insurance will cover your business in case vehicles are involved in road accidents. This insurance also protects your business if your dealership’s car causes third-party property damage.

4. Commercial property insurance (buildings insurance)

When you run your car dealership from your own building, there’s no doubt that you have to get commercial building insurance. This insurance covers you financially in the event of loss or damage due to fire, natural disasters, vandalism and other perils stated in your policy.

When renting, you might not be responsible for insuring the commercial property you use, however, the landlord may pass the cost of this insurance on to you. As a result, you need to know what the insurance covers and doesn’t cover to ensure your assets are adequately protected.

5. Worker’s compensation insurance

Your own employees might get injured or become ill in the course of duty. It makes business sense to insure your employees, but it’s also essential to protect their livelihoods. You can ensure your employees are covered in such cases by having worker’s compensation insurance.

This type of insurance will pay out for medical expenses or provide a cash benefit to the injured or ill employee. 

6. Auto dealer’s errors and omissions insurance policy

Offering advice is a vital part of running an auto dealership. It’s possible for someone to provide inaccurate information or recommendations to a customer. For example, a customer might provide information that suggests they need a one-tonne bakkie. Realising that your dealership doesn’t have such a car, the salesperson might recommend a smaller car.

Let’s say that the customer buys the car and finds that it doesn’t effectively perform the intended functions and, therefore, he loses money. He may sue your business for recommendation errors. That’s where errors and omissions business insurance can come to your rescue.

This type of insurance will pay for legal fees and damages resulting from the inaccurate information or advice provided.

Can you buy car insurance from a dealership?

No, new and used car dealerships cannot provide car buyers with auto insurance plans. The good news is that some insurance companies have agents available at certain car dealerships to help customers buy car insurance. Understandably, some customers may want to buy car insurance directly from an auto dealership. Although personal car insurance is not compulsory in South Africa, it is necessary if you’re financing a car purchase. Buying a new set of wheels or a used car in conjunction with personal vehicle insurance can simplify the car-buying experience.

Car dealerships can also recommend suitable car insurance companies. If you’ve bought a car before, you’ll know that car dealerships offer extra services or benefits such as extended warranties and anti-theft devices. Ultimately, a car buy still has to buy personal auto insurance directly from an insurance company.

Get insurance for car dealerships from Dialdirect

If you would like to keep your car dealership protected and running smoothly, we advise that you consider speaking to a trained consultant to assess your risks and make a recommendation about what kind of car dealer insurance you need. The first step is to request a free and no-obligation online business insurance quote from Dialdirect.

Sources:

[1] BusinessLive: Hijacking is on the increase, Tracker says

Disclaimer: The information in this article is provided for informational purposes only and should not be construed as financial, legal, or medical advice.