What Auto Dealer Liability Coverage Includes and Why It Matters

Running an auto dealership involves more than just selling cars. It also includes managing employees, keeping customers safe, and protecting the business from accidents and legal claims. That’s where auto dealer liability coverage comes in.
Auto dealer liability coverage helps protect a dealership from financial loss if something goes wrong-like a customer slipping and falling or an employee damaging a car during a test drive. Without this protection, dealers could face high costs from lawsuits, medical bills, or property damage.
What Does Auto Dealer Liability Coverage Include?
Auto dealer liability coverage is often made up of several types of protection. Each one covers different types of risks that a dealership may face every day.
General Liability Insurance
This covers accidents that happen on your dealership property. If a customer is injured by slipping on a wet floor or tripping over equipment, general liability insurance helps cover medical bills and legal fees. It also covers property damage if a visitor’s belongings are harmed while on-site.
Garage Liability Insurance
Garage liability insurance for auto dealerships is one of the most important parts of a coverage plan. It protects the business from claims related to car repairs, vehicle storage, and other garage operations. If a customer claims their car was damaged or made worse during a service, this coverage helps pay for legal defense and any required settlements.
Garagekeepers Insurance
This is different from garage liability. Garagekeepers insurance covers damage to a customer’s vehicle while it is in the dealership’s care-such as in the repair shop, car wash area, or parking lot. If a customer’s car is stolen, vandalized, or damaged by weather while in your lot, this coverage helps pay for the repair or replacement.
Dealer’s Open Lot Coverage
This type of insurance protects the dealership’s inventory of vehicles. It covers damage or loss from events like hailstorms, theft, fire, or vandalism. Since cars are a dealership’s biggest asset, protecting them is critical.
Workers’ Compensation
If employees are injured on the job, workers’ compensation pays for medical care and lost wages. This insurance is required in most states and is a must-have for all auto dealerships with staff.
Why This Coverage Matters for Your Dealership
Auto dealer liability coverage is not just a safety net- it’s a smart business decision. Here’s why:
Reduces Financial Risk
Even a single accident or lawsuit can lead to thousands of dollars in costs. Without insurance, a dealership would have to pay out of pocket, which could put the entire business at risk. With coverage in place, insurance helps shoulder the financial burden.
Builds Customer Trust
Customers are more likely to feel safe doing business with a dealership that is well-protected and professional. Knowing that the dealership has proper insurance shows customers that you care about their safety and satisfaction.
Keeps You Compliant
Many states require auto dealerships to carry specific types of insurance. Having proper liability coverage ensures your business follows the law and avoids fines or license issues.
Covers Unique Dealership Risks
Car dealerships face risks that are not common in other businesses. From test drive accidents to damage during service, liability insurance helps cover these unique situations so you can stay focused on running your business.
Protecting Your Dealership’s Future
Auto dealer liability coverage is essential for protecting your business, your employees, and your customers. Without the right insurance, a simple mistake or accident could threaten the future of your dealership.
Make sure your dealership is covered. Taking this step now can save you from major financial stress down the road.
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