Auto dealer insurance is a specialized type of business insurance designed to protect car dealerships from risks like property damage, theft, customer injuries, and accidents during test drives. It’s essential whether you operate a small used-car lot or a large franchise.

Why Auto Dealer Insurance Matters

Running a dealership means dealing with high-value inventory and constant customer interactions. One unexpected event—like a hailstorm, a break-in, or a test drive accident—can cause huge financial losses. Auto dealer insurance ensures you’re covered and your business stays running smoothly.

Core Coverages in Auto Dealer Insurance

Garage Liability Insurance

Covers bodily injury and property damage caused by dealership operations or vehicles in your control.

Dealer’s Open Lot Coverage

Protects your car inventory from risks such as theft, vandalism, fire, and severe weather.

Garagekeepers Liability

Covers customer-owned vehicles left with you for repairs, detailing, or servicing.

Business Property Insurance

Protects your building, signs, tools, and office equipment from covered losses.

Workers’ Compensation

Covers medical bills and lost wages if your employees are injured while working.

Surety Bonds

Required in most states to guarantee ethical and legal business practices.

Cost of Auto Dealer Insurance

The cost depends on your location, inventory size, coverage needs, and claims history. On average, small dealers may pay $300–$700 monthly, while larger operations can pay over $1,500.

Factors That Impact Premiums

Your rates are influenced by security measures, employee driving records, types of cars sold, and your state’s requirements.

Common Claims

Typical claims involve theft, storm damage, on-lot accidents, and customer injuries during test drives.

Ways to Save on Auto Dealer Insurance

Compare quotes from multiple insurers, bundle policies, install security systems, and maintain a clean claims record.

Choosing the Right Insurance Provider

Look for a company with experience in auto dealer insurance, strong financial stability, and excellent claims service.

State Requirements

Most states require liability coverage and a surety bond to operate legally. Some may have specific coverage minimums.

Documents Needed for a Quote

Have your dealer license, employee list, inventory details, and claims history ready when requesting quotes.

Avoiding Underinsurance

Not having enough coverage could lead to devastating financial loss if disaster strikes.

Final Thoughts

Auto dealer insurance isn’t just a legal requirement—it’s your business’s safety net. The right coverage shields your inventory, staff, and finances from costly risks.

FAQs

1. Is auto dealer insurance mandatory?

Yes, most states require it.
2. Does it cover test drive accidents?

Yes, through garage liability coverage.
3. Are luxury vehicles more expensive to insure?

Yes, due to higher replacement costs.
4. Can I lower my premium?

Yes, with better security and a clean claims history.
5. Does it cover natural disasters?

Yes, if your policy includes open lot coverage.