N E W S L E T T E R    E X C E R P T S

Unaccompanied Test Drive Thefts

If your policy has unaccompanied test drive liability coverage are vehicles stolen on unaccompanied test drives covered? No. To keep our lawyer happy we have to say “not with any company we’ve ever heard of.” In the event of an auto accident liability coverage helps prevent you from being sued. It covers damage to the property of others and medical bills. Liability coverage does not cover your car. Comprehensive & Collision covers your car. Unaccompanied test drive liability coverage is just that. Liability coverage, not comp & collision. “False pretense coverage” covers cars that you are tricked out of. The companies that offer unaccompanied test drive coverage don’t offer it on policies that include False pretense coverage.

The Kitchen Sink

For dealers that want the most complete policy available you can get an endorsement that covers all of the following: accounts receivable, valuable papers and records, computer & telephone hardware, fire department service charges, signs, building glass, sewer back up, pollutant clean up, fire suppression system recharge and debris removal. Some insurance companies offer this very inexpensive coverage to dealers with building coverage.

Hard To Insure

Have you been told that you can’t be insured? We have companies that will cover dealers with all of the following: new in business, salvage title car dealers, exporters, motorcycles, RVs, trailers, big rigs and of course claims.

Bond Premiums Continue To Go Down

Dealers in the car business for ten years or more remember bonds skyrocketing during the financial crisis. At first they stayed high. Then they came down slowly. We’ll bonds prices are better than they’ve ever been. Have you shopped your bond lately? Don’t pay too much. We work with multiple surety companies to help you save money.

Where Did My Insurance Company Go?

In the first few months of 2014 State National Insurance, TOPA Insurance and Starr Indemnity all left the California / Arizona dealer insurance market. We hear that losses made it unprofitable for each of them to do business here. Did your insurance company disappear? We work with multiple companies to save you money. We shop your insurance based on your business model and your location to place you with the company with rates best for you.

Bond Rates Have Plummeted

Six years ago bond rates skyrocketed during the economic crisis. For the last couple of years rates have been coming down. Since January some companies have reached pre-disaster rates. Click Here to take you to our bond application. We shop multiple bond companies. We have cut many dealers bond rates in half. California and Arizona dealers click the link and save.

Double Insuring.

Do you have a dealer policy and a personal auto insurance policy? Most dealers do not have to. Your dealer policy has liability coverage for lawsuits. It can also have all of the following: Comprehensive and collision coverage for your inventory and your personal cars. Uninsured motorist coverage for your medical bills. It can waive your deductible if you are hit by an uninsured motorist and a lot more. Many car dealers do not have a personal auto policy. We can help you structure your coverage to save you as much money as possible.

50% - 66% - 100%

If the flooring company only requires a percentage of my inventory to be insured, why would I want to cover it all? Because of your insurance policys co-insurance clause. Part of the insurance companys formula to determine their risk and your rates, is the dealers total inventory value. Although we do everything we can to save dealers money, we would never want to do anything that would cause a claim to be underpaid. Under declaring inventory amounts leads to claims being underpaid by the same percentage the inventory was under declared.

Bond Rates Are - Way Down

Dealer in business since 2007, and earlier, remember bond prices sky rocketed in 2008. Bond rates are finally on the way down. Since summer 2012 may bond companies have much lower rates. Many dealers are paying far less than they paid a year ago. This is across the board for all credit types. When your bond is up for renewal be sure to shop. We work with multiple companies. We can help you save money.

Insurance Review

Have you hired new employees since you wrote your policy? Do you have more inventory (or less inventory) then you did when you wrote your policy? Do you have limits that are unnecessarily high? Are you doing everything reasonable to keep your premium low while maintaining the proper coverage to avoid problems? A quick insurance review can make sure that you are saving every penny possible. Call us any time for an insurance review. We can usually do it on the spot.

Flooring Companies and the Right Inventory Coverage

Don't make this simple mistake. Flooring companies typically require that you have enough coverage to cover either 50% or 66% of your credit line (varies by company.) That is the flooring company's minimum requirement. The dealer insurance companies require that 100% of your inventory is covered. If 100% of inventory is not covered the insurance companies are allowed to underpay a claim by the same percentage the inventory was underreported. See our article "Underreporting Money Saver or Suicide?" in our 2010 newsletter for a detailed explanation.

Impossible to Insure?
Do you sell salvage title vehicles? Have you been told that you can't get insurance? You can. We have a company that covers dealers that sell salvage title vehicles. We can get it covered for you. Are you new in business? Have you been told that you need three years in business to get covered? That's ridiculous. We can get you covered. Have you been told "No"? We can help. Have you been told that you can't put your personal cars on your dealer policy? With some companies this may be true. We have companies that allow you to put your on your dealer policy helping you save a small fortune.

Auto Rental Agency

Are you thinking about turning you unsold inventory into a profit center? Independent auto rental outlets have specialized insurance needs. Car dealer insurance alone does not cover everything a rental dealer needs. We have access to the coverage auto rental outlets need.

Bad Check

Nobody covers that... right? Sometimes. If you are given a check written on a closed account, or sell a car and identity fraud was used. There is coverage available. "False pretense / trick and device" is an option for exactly this. Coverage for this is actually very inexpensive.

Dealer Bonds
At a time when the California DMV is proposing raising the retail dealer bond requirement to $100,000 the dealer bond market has undergone serious losses. In order to mitigate their losses the surety companies have adopted much more stringent underwriting guidelines. As a result rates have skyrocketed and many dealers have had their bonds flat cancelled. Can you do anything about this? YES you can. You can shop your bond rates. Similar to the finance companies you shop to get your customers the best interest rate for their situation, surety companies all have different underwriting guidelines and are set up to accommodate the type of risk they prefer. We work with multiple bond companies so we are equipped to help you shop for your bond and save money.

Other than passenger car coverage

Do you sell vehicles other than passenger cars and light duty trucks? Do you occasionally take them in trade? RVs, streetbikes, trailers, medium duty and big trucks... Can these be included in your dealer insurance policy? Not all insurance companies will cover them. We have carriers that cover all of these. You can put all of them on your dealer policy with Motor Dealer Services.

Can I put my dealership and repair shop on the same policy?

Not with all companies. Some companies that insure car dealers will not cover dealers that also perform repairs for the public. Most companies that insure repair shops will not cover shops that sell cars. Having two policies is almost always far more expensive than insuring both of these on one policy. We have a carrier that will help you save money by covering both of these on one policy.

Consignment Vehicles

Do you take vehicles on consignment? Are a lot of your vehicles on consignment? Are a small percentage of your vehicles on consignment? Do you know your insurance companie's guidelines regarding what is acceptable? We represent a carrier that allows up to ninety percent of dealer inventory to be consigned.

Garage Keeper's - I don't have a repair shop alt
The term "garage keepers" almost sounds like repair shop insurance. It's not. GKLL or "Garage Keepers Legal Liability" coverage is an option that covers a risk that almost all used car dealers are exposed to. GKLL covers vehicles in your care, custody and control that you don't own. It covers cars that you are driving to establish trade in value and vehicles that you are driving to determine if a customer's complaint about a sold vehicle is valid. Last it covers vehicles on consignment to you. Almost all car dealers drive cars before they buy them. Almost all dealers have customer complaints about vehicles from time to time. Some dealers take cars on consignment. This is a important, inexpensive, coverage that almost all dealers need.

Other than passenger car coverage

Do you sell vehicles other than passenger cars and light duty trucks? Do you occasionally take them in trade? RVs, streetbikes, trailers, medium duty and big trucks... Can these be included in your dealer insurance policy? Not all insurance companies will cover them. We have carriers that covers all of these. You can put all of them on your dealer policy with Motor Dealer Services.

Comprehensive vs. Specified Perils

For dealers that want the most complete policy possible, with the least exposure possible, Comprehensive is the only way to go. I have seen quotes that list "comprehensive" on the proposal and then give a list of covered perils. Comprehensive is an "all risk" / "open perils" policy. It covers everything that is not on the exclusions list. Specified perils policies cover only the perils specified in the list. Typically the perils specified are: theft, wind, hail, aircraft, riot, vandalism, explosion and smoke. Here are some examples of things not covered by a specified perils policy. Tree limb falling on a vehicle, building collapse, sink hole, flood, etc. If you are looking for the most complete policy possible don't be mislead.


If a customer tricks you into voluntarily giving him the keys to a car, he leaves and you never see him again, can you report it stolen to the police? Can you turn in a stolen vehicle claim with your insurance company? In both cases, NO. A crime has obviously been committed. But that crime is not Grand Theft Auto. It is embezzlement. Is there a way to insure against this? YES. "Trick and Device/False Pretense" coverage can indemnify you from this type of loss. Not all insurers offer this coverage. We have insurers that do.

Title Problems / Mileage Problems

If you sell a car in good faith, your title says 45,000 miles and the customer is issued a title that says "True Miles Unknown" or "Mileage Exceeds Mechanical Limits" and your customer sues you, will your insurer defend you in court and pay damages? What about branded titles? Your title is clean the customer gets a title branded "Salvage" or "Flood" etc. If you are sued will your insurer defend you and pay damages? Maybe. If you have Errors and Omissions for Title, Mileage and Truth in Lending coverage the answer is yes.

Is my tow dolly or tow truck covered?

If you list it as a "scheduled vehicle" it's covered and so is your vehicle sitting on top of it. Does this coverage extend to vehicles I tow "for hire?" NO. This coverage excludes tow for hire. It is only available for dealers transporting their own inventory.

Are cars I take on consignment covered?

Maybe. They are not covered by "dealers open lot/inventory" coverage. Consignment is not considered inventory by the insurance companies. There is coverage available. GKLL " Garage Keepers Legal Liability covers vehicles in your care, custody and control that you don't own. It also covers vehicles that you are driving to establish trade in value and vehicles that you are driving to determine if a customer's compliant about a sold vehicle is valid. In addition, dollar for dollar this coverage is less expensive than inventory coverage.

Under reporting - Money Saver or Suicide?
A dealer told me that he was reporting a certain amount of inventory with his agent that was much lower than his actual inventory amount. He thought that he was saving money by paying for less inventory. Whoa! This is no place to cut corners. The problem with this is called "Co-insurance." Co-insurance states that if inventory is underreported by more than ten percent, when a claim is submitted the claim will be paid minus the percentage that was underreported.

Actual Inventory Amount $200,000
Reported Inventory Amount $100,000
Under Reported (Co Insurance) 50%
Claim $10,000
Coinsurance at 50% $5,000
Due on Claim $5,000
Deductible $1,000
To be paid on claim (NET) $4,000

This is no place to fool around.

The Tow Company has insurance, so I'm OK, right?

Maybe. Tow companies, auto transport companies, mechanics, body shops and detail shops are usually insured. If the company that has your vehicle in their "care, custody and control" has Garage Keepers coverage you should be fine in the event of a loss. There are factors that can get in the way. Underinsurance due to low coverage limits or catastrophic loss, non-payment of insurance premium (temporary lack of coverage at the time of loss.) Loss due to a condition not covered. Dealers Open lot/Inventory coverage usually takes secondary liability in these situations. If their insurance company isn't covering you, your dealer insurance company usually is. This should always be clarified with your agent.

Is there information here that your agent didn't tell you?
Did it cost you money?
We hope not.

Written by: Dave Hoffman - Broker / Owner Lic. CA 0D87197 AZ 906944 NV 1100441 ID 619149