Dealers insurance is a very specific type of commercial insurance policy. There are different insurance policies that are important to auto insurance dealers. These can either be required by the NC DMV or put in place to protect the interests of an auto dealer.
The 3 most common forms of insurance are Garage Liability, Surety Bonds, and Dealers Open Lot Insurance. Please see an explanation of these three forms of insurance below.
3 Most Important Dealer Insurance Coverage Types
Garage Liability
A garage liability policy is a commercial auto policy that covers not only the liability of someone being hurt at the dealer’s place of business, but also any liability while the dealer owned vehicles are being test driven. This includes bodily injury or property damage to another while the dealer-owned vehicle is being driven. This policy is a requirement of the NC DMV in order to have a dealer’s license.
This type of car dealer insurance coverage is important because one small incident can bankrupt a dealer if there is significant bodily injury or property damage to another or a lawsuit is brought against the dealer.
Surety Bond
Another requirement of the NC DMV is a Dealer Surety Bond. A bond of $50,000 is required in North Carolina for one dealer location. A $25,000 bond is required for each additional dealer location. A dealer’s surety bond is a guarantee that an automotive dealer will adhere to the terms of the state including consumer protection and the payment of taxes.
The surety bond is an agreement between the three parties: the dealer(principal), the buyer(obligee) and the bonding company(surety). The surety bond ensures that the dealer fulfills all obligations to the buyer based on the rules of the state and local laws. If the dealer does not, then the surety pays these expenses. A dealer bond protects the buyer, not the dealer.
Dealers Open Lot (DOL)
This is the physical damage coverage on the vehicles owned by the dealer that are for sale. This covers both comprehensive(fire, theft, hail damage, tree falling on vehicle, etc.) and collision(accident). Coverage can be on either new or used cars.
Coverage is based on the average and total number of vehicles that would be on the lot at any given time. That way there will be coverage if there is a total loss on all vehicles. For example if you had a maximum of 10 vehicles at any time and no more than $10,000 value per vehicle than your total DOL coverage would be $100,000. 10 cars x $10,000 value of each car= $100,000 total coverage.
Carriers will generally ask what precautions are taken on the lot that would prevent an accident or the vehicles from being stolen. Some examples are fences, video cameras, lights, and security systems.
This is just the basic information regarding dealer insurance policies. If you have any additional questions please don’t hesitate to give us a call at 704-494-9495. We will be happy to help you in any way we can.