California Used Car Dealer Insurance Buyer's Guide| Your Car Dealer Bond LLC

Selling used vehicles in California can be a highly rewarding and lucrative business enterprise. Yet, it comes with certain risks and potential losses that you can avoid by getting a California used car dealer insurance policy. Here’s what you need to know about it!

What is California Used Car Dealer Insurance?

California auto dealer insurance is a policy that can cover damages or losses that occur to the vehicles you are selling, to your facility and property, to your employees or customers and more. If you do not have an insurance policy, you will have to cover the expenses associated with such incidents yourself. With insurance, the insurance company will cover different expenses, depending on the types of coverages included in your policy.

How much does the car dealer insurance cost in California?

There is no fixed cost for getting your California auto dealer insurance. Instead, the cost is determined by a number of different factors, including who your provider is. The factors and risks that are considered by your insurance carrier include:

The types of coverages that you wish to include in your policy, and the amount of coverage you are requesting
The size of your company, the number of its employees, and their roles in the company
The location of your business
The value of your inventory
The maximum pick-up/delivery distance (more or less than 200 miles)
Your experience in the garage automotive industry and your experience as a business owner
Your prior insurance history as well as your claims history

All of these taken together make up the cost of your California used car dealer insurance policy.

How to get insurance for your auto dealership in California

To get California car dealer insurance, you will need to fill out and submit our online insurance application form. We will then contact our providers to seek out the best possible rate for you. We will get back to you shortly with your free quote. Want to find out how much your premium will be? Request a quote and let’s get started!

Car dealer insurance requirements in California

The state of California does not require used car dealers to obtain insurance. However, two important caveats apply here! Vehicles that are driven on public roads must be insured. Moreover, any personal auto insurance coverage does not apply to vehicles that are purchased by a car dealer business. For these reasons, it is a good idea to get insurance even though the state does not require it. Dealers frequently also get insurance in order to meet the requirements of landlords, auctions, and lenders, or to minimize the risk of getting pulled over and having uncovered claims. To become a car dealer, you must apply at the California Department of Motor Vehicles and complete the licensing requirements, such as getting a California auto dealer bond.

Types of insurance and coverage

In total, there are over 15 types of coverages that can be included in your California car dealer insurance policy. The most common types of coverage include:

Inventory coverage - includes the purchase price and the reconditioning on the cars that you buy from other dealers. It does not include the profit you expect to make from selling a vehicle.
Garage liability coverage - applies to property damages or bodily injuries that are sustained by a third party as a result of the operations of your auto garage operation or while they are using your insured vehicles.
Garagekeepers coverage - designed to protect against claims arising from physical damage to vehicles owned by others that are left in your care, custody, or control. This includes vehicles that are being serviced, repaired, stored, and test-driven.
Medical payments coverage - can cover any medical expenses sustained by you and/or your passengers if involved in an accident in a covered auto. It can also be used for small claims on your premises such as a customer’s trip or fall.
Scheduled vehicle coverage - supplies liability and physical damage coverage to vehicles specifically listed on your policy. This coverage should be considered when a vehicle is owned by you or your spouse, rather than in the business name. In many cases, it makes good business sense to dissolve your personal lines auto insurance policy and obtain insurance on the personal exposures under your car dealer policy. This may result in having more coverage for less money.
Contents coverage - provides replacement costs for your personal property, including leased business personal property for which you are contractually responsible, in the event of a fire, burglary, vandalism, and collapse. Examples of personal property include computers, tools, furniture, fixtures, machinery, and other equipment.

On top of the above, there are several other coverages that are taken up less frequently but are still worth considering. These include:

Damage to rented premises coverage (DTRP) - also known as Fire Legal Liability, this coverage provides liability for property damage caused by a fire to premises leased or rented to you and arising out of your own negligence.
Broad form drive other car coverage - for businesses not individually owned, this coverage may be used to extend the garage policy to provide insurance for partners or corporate officers who do not carry their personal auto policy when borrowing or renting cars in their name. The individuals named in the endorsement become insureds while using autos they do not own.
Broad form products - provides coverage for property damage to its product(s) even if the resulting damage was caused by a defect existing in the product at the time of customer purchase.
False pretense coverage - coverage provided if the insured is tricked or schemed into voluntarily parting with a covered auto or the insured acquires an auto from a seller who did not have legal title

FAQs about Used Car Dealer Insurance in California

Do I need dealer insurance to get or keep my California DMV dealer license? Does it matter if I’m not a retail auto dealer?

The California DMV insurance does not require proof of insurance to get or keep your used car dealer license. Even though it is not mandatory, getting insurance can save you quite a lot of trouble in your day-to-day operations.

Why does my dealership policy need an aggregate limit on the dealer’s physical damage collision deductible?

In rare instances, collision losses affect more than one dealership vehicle at the same time. For example, let’s say a motorist loses control of their vehicle in front of your dealership and collides with six or seven dealership vehicles. With the aggregate deductible in place, it limits the amount a dealer pays in out-of-pocket deductible expenses for the loss.

What is garage liability insurance and why do I need it for my used car dealership?

Garage liability insurance provides coverage for property damage and bodily injury resulting from the operations of an auto garage operation. It is the most common way for dealerships to reduce the financial impact of a risk occurring. Why go through the hassle of creating an awesome dealership business if you are not going to protect your investment?

What coverage do the insurance companies you work with provide?

Among others, they offer Garage Liability, Physical Damage, Garagekeepers Liability, Personal Injury, False Pretense, Title Errors and Omissions/Truth In Lending/Federal Odometer, Broadened Coverage, and Commercial Property.

What if I only work as an auto broker, do I still need insurance?

The very nature of the auto broker side of the business dictates that the sales transaction needs to take place between a retail car dealer and a buyer. The auto broker helps source the vehicle to be purchased but never actually buys or sells the car or truck. So how could an auto broker be found liable for doing nothing more than making the introductions between buyer and seller?

What businesses need some form of garage insurance?

Garagekeepers Coverage is designed to protect against claims arising from physical damage to vehicles owned by others that are left in your care, custody, or control. This includes vehicles that are being serviced, repaired, stored, and test-driven. This is an optional coverage that can be added to a used car dealer insurance policy.

How can I limit my risk exposures?

We personally assist each of our insureds with a loss control survey in order to minimize or remove risk exposures.

If I am a wholesale-only dealer, does my Geico or Progressive, or State Farm Insurance Policy cover vehicles I'm buying from the auction?

Unfortunately, every personal auto policy has an exclusion for commercial-type exposures. This means that when an accident happens, ownership of the vehicle will need to be proven. The purchase documents will show that the vehicle was purchased by the dealership. (If it was purchased by the dealer as a private party, then the dealer as a person would have had to pay the sales taxes and DMV fees.) Once a dealer is established as the owner of the vehicle, a personal auto policy will exclude all claims related to that vehicle.

Is slip and fall liability and auto liability included in a used auto dealer insurance policy?

Some insurance policies have started to parse out the exposures separately but both elements of loss can be covered under a used auto dealer insurance policy. In some policies, the deductibles can even be modified for a truly tailored insurance policy to fit your budget and risk tolerance threshold.

California Used Car Dealer Insurance