Auto Dealers Physical Damaged Coverage is also known as Dealers Open Lot.
The coverage includes protection for automobiles, motorcycles, trucks and trailers owned by the automobile dealer that is for sale. The coverage could extend to other types of vehicles owned by the dealership such as golf carts, construction equipment or scooters that the dealers are eligible to sell under their state license.
Extensions to this coverage can be issued for other vehicles on a dealer’s lot that may be under a financial floor plan or on client consignment.
Insurance carriers determine auto dealer rates by using a few different factors:
- County the dealership is physically located in
- Wholesale cost of the total inventory
- The total number of vehicles a dealer has at any one time
- Where the inventory it kept; i.e.: open lot or garage parking
- The most expensive vehicle at any given time at the dealership
- The policies deductibles
- The total number of furnished demo drivers the dealership will have
- Total radius of the dealership operations
Don’t get caught by being under insured
When get coverage for your dealerships inventory it’s important to remember why you have it in the first place, it’s to cover you against losses. Dealers often get in trouble by understating their inventory levels to the insurance carriers and they don’t have enough coverage to protect themselves against major loses. The insurance companies know the game and they protect themselves with the co-insurance clause. I.e.: Insured has inventory of $500,000 of cars and he elects or takes insurance on just $250,000. In the event of a claim the insured would be underinsured by 50% and the insurance company is only responsible to pay 50% of your claim less any deductibles. This is why it’s important to insure your coverage matches your inventory values.
Important to know the Drive Away Collision Limitation
Garage policy limits collision coverage to 50 miles for autos being driven or transported from point of purchase or distribution to their destination. This exclusion applies if the distance is greater than 50 miles even if a collision occurs within the 50-mile radius.
Driveaway collision coverage deletes this distance exclusion and affords coverage for the pick up or delivery of vehicles to or from a point greater than 50 miles from the dealership. This exclusion does not apply to third party liability coverage. Liability protection applies anywhere in the continental U.S., Canada and U.S. Territories.
False Pretense Coverage
The policy states that “voluntary parting” with a vehicle under trick, scheme or false pretense is not considered theft. In the event you “voluntarily” hand over a vehicle to someone for any reason, including a test drive, if the vehicle is not returned, it is not covered. In addition to “voluntary parting” being excluded, acquiring a vehicle from someone who doesn’t have legal title is also excluded under theft. In order to have protection in both of the described situations, False Pretense Coverage needs to be purchased as it is not included in your physical damage open lot coverage policy.