Car Dealership Business Insurance

Car dealerships can compare business insurance policies from top providers through Insuranceopedia to find the right coverage for general liability, property damage, and employee protection.

Why Do Car Dealerships Need Insurance?

Car dealerships need insurance to cover the inherent risks associated with their job, including theft or vandalism, property damage, legal liabilities, and, of course, maintaining client trust.

Perhaps most importantly, car dealerships maintain highly valued inventory on open lots, often readily accessible via main roads, which increases the risk of theft, vandalism, and other damage. With the right type of insurance, a single unexpected event like a fire or a significant break-in could result in financial damages your company can’t come back from.

Car dealerships also have to face significant risk of liability from things like accidents and injuries to employees, particularly those who are test-driving vehicles or offering services at the car dealership for vehicle repairs. Without the right insurance, car dealerships can be on the hook for significant losses if there is an accident or other damage, and might be financially responsible for any damages resulting from a lawsuit.

It also adds credibility—many customers and clients require proof of insurance before buying from a car dealership. If you’re an independent car dealership or you have a business with several locations under your employ, having the right insurance helps you operate confidently, knowing you’re covered if something goes wrong.

What Insurance Do Car Dealerships Need?

Running a car dealership involves managing high-value inventory, a busy staff, and constant foot traffic. These factors introduce risks ranging from lot theft to customer injuries. To safeguard your investment, review the following breakdown of essential types of business insurance coverages.

Dealer’s Open Lot Coverage (DOL)

This is arguably the most critical policy for auto dealers who store inventory outdoors. It protects the vehicles you plan to sell from physical damage or loss caused by external events like weather or theft.

Example: A severe hailstorm passes through your area and dents the hoods and roofs of twenty vehicles parked on your outdoor sales lot. DOL coverage pays for the necessary bodywork and repairs.

Garage Liability Insurance

While general liability covers basic accidents, garage liability insurance is specifically designed for the day-to-day operations of an auto business. It covers property damage or bodily injury caused by the operations of your garage or during the use of covered autos.

Example: During a test drive, a potential buyer is injured because the brakes on the vehicle malfunctioned due to a service error. If the customer sues, this policy helps cover the settlement and legal costs.

Garagekeepers Insurance

This policy is distinct from garage liability. It specifically covers damage to vehicles that do not belong to you but are in your care, custody, or control. This is vital if your dealership has a service department.

Example: A customer leaves their SUV with you for an engine tune-up. Overnight, a fire in the service bay destroys the vehicle. Garagekeepers insurance covers the cost to replace the customer’s SUV.

General Liability Insurance

This acts as your primary defense against third-party lawsuits alleging bodily injury or property damage that happens on your premises but is not related to garage operations. It covers legal defense fees, settlements, and medical expenses.

Example: A prospective buyer trips over a loose rug in your showroom waiting area and breaks their wrist. General liability pays for their medical bills and protects you if they file a lawsuit.

Workers’ Compensation Insurance

Most states legally require this coverage as soon as you hire your first employee. It provides benefits to workers who suffer work-related injuries or illnesses, covering their medical care and lost income while they recover.

Example: A mechanic in your service center drops a heavy transmission on their foot, requiring surgery and six weeks of recovery time. Workers’ comp pays for the hospital bills and a portion of the mechanic’s wages during their leave.

Commercial Property Insurance

This policy protects the physical assets you own or lease. It covers the building itself and the contents within it against perils like fire, windstorms, theft, and vandalism.

Example: A lightning strike causes a fire that damages the roof and structural supports of your main showroom. Commercial property insurance pays for the reconstruction of the building.

Business Personal Property (BPP) Insurance

While Commercial Property covers the building, BPP covers the movable items inside it. This includes your office furniture, computers, tools, and phone systems.

Example: Burglars break into your finance office over the weekend and steal several computers and expensive printers. BPP coverage helps pay to replace the stolen equipment so you can get back to business.

Commercial Auto Insurance

This policy covers vehicles owned by the business that are used for dealership tasks, such as parts delivery trucks or shuttles. It covers liability and physical damage if an accident occurs.

Example: Your parts driver runs a red light while delivering a component to another shop and hits a sedan. Commercial auto insurance covers the damage to both vehicles and any medical costs for the other driver.

Cyber Liability Insurance

Car dealerships handle sensitive customer data, including social security numbers, credit reports, and bank details. This policy helps you respond to data breaches and cyberattacks.

Example: A hacker breaches your dealership’s network and steals the credit applications of 500 customers. Cyber liability covers the cost of notifying the victims, offering credit monitoring services, and managing the legal fallout.

Employment Practices Liability Insurance (EPLI)

This coverage protects dealership owners from lawsuits filed by employees alleging wrongful acts such as discrimination, harassment, or wrongful termination.

Example: You fire a salesperson for poor performance, but they sue you claiming they were fired due to their age. EPLI helps cover your legal defense costs and any resulting settlements.

Hired And Non-Owned Auto (HNOA) Insurance

This covers liability risks when you or your employees drive vehicles the business does not own for work purposes. This includes personal cars or rented vehicles.

Example: You send a sales associate to the bank to make a deposit using their own personal car. On the way, they cause a minor accident. HNOA provides liability coverage for the dealership, as the employee was working at the time.

Crime Insurance

Standard property insurance does not always cover crimes committed by employees or sophisticated theft schemes. Crime insurance bridges this gap by covering financial losses from dishonesty, forgery, or theft.

Example: You discover that an office manager has been forging signatures on checks and stealing funds from the business account over several months. Crime insurance reimburses for the stolen money.

Umbrella Insurance

When a claim exceeds the financial limits of your primary policies (like General Liability or Commercial Auto), Umbrella insurance provides an extra layer of protection.

Example: A dealership vehicle is involved in a massive accident on the highway, resulting in a lawsuit for $1.5 million. If your primary auto policy only covers up to $1 million, Umbrella insurance kicks in to pay the remaining $500,000.

Business Owner’s Policy (BOP)

A BOP is a cost-effective bundle that combines General Liability and Commercial Property insurance into one package. It is often cheaper than purchasing the policies separately.

Example: A pipe bursts in your back office, destroying the carpet and damaging the drywall (Property) while also forcing you to close for a week (Business Interruption). A BOP helps cover the repairs and the lost income.

Cheapest Car Dealership Garagekeepers Insurance

The cheapest option for Garagekeepers coverage is Progressive Commercial, with an average annual cost of $1,045.

Note: Estimates are based on a standard “Direct Primary” garagekeepers policy for a used car lot with a vehicle inventory limit of $100,000. Actual premiums will vary based on lot location, security measures (fencing/cameras), and the number of dealer plates in use.

Cheapest Car Dealership General Liability Insurance

The cheapest option for General Liability is Next Insurance, with an average annual cost of $385.

Note: Estimates are based on a $1 million per occurrence / $2 million aggregate liability limit for a small dealership with 1–3 employees. Actual premiums will vary based on annual revenue, customer foot traffic, and the specific state’s risk classification.

Cheapest Car Dealership Business Owner’s Policy

The cheapest option for a Business Owners Policy (BOP) is Next Insurance, with an average annual cost of $795.

Note: Estimates are based on a bundled package including General Liability and Commercial Property coverage for a leased lot with a small office building (under 1,000 sq. ft.). Actual premiums will vary significantly based on property value, deductible choices, and added endorsements like business interruption coverage.

How Much Does Car Dealership Business Insurance Cost?

Car dealerships pay an average of $57 per month for general liability insurance. Several factors influence the cost of business insurance, including your business location, the number of employees, the types of services you offer, the records you keep, your claims history, and the type of inventory you sell, such as high-end and luxury vehicles or new vs. used vehicles.

Insurers also consider the amount of coverage you choose and whether you package policies together. While it may be tempting to go with the cheapest option, it’s important to choose a plan that truly protects your business from its most likely risks.

Note: The estimates above are based on national averages for small-to-mid-sized independent dealerships with moderate inventory levels. Actual premiums will vary significantly depending on factors such as the dealership’s location (state/city), annual revenue, number of employees, total value of vehicle inventory, claims history, and specific policy limits chosen (e.g., deductible amounts). “Dealers Open Lot” and “Garagekeepers” costs, in particular, fluctuate heavily based on the security measures of the premises and the maximum value of vehicles stored.

How Is Your Car Dealership Business Insurance Cost Calculated?

Insurance providers evaluate several specific details to decide your premium. Their goal is to understand the unique risks associated with your auto dealership. The size and nature of your operation are primary factors. A massive franchise naturally carries a different risk profile than a small, independent used car lot.

The specific services you provide also impact the price. For example, a dealership that includes a service and repair center faces different liabilities than a business that strictly sells inventory. The total value of the vehicles parked on your lot is another major component in the calculation.

Your physical location plays a large role as well. Premiums are often higher in areas prone to severe weather events or high theft rates. Local regulations also influence which policies you are legally required to carry.

Finally, underwriters review your track record. If you have filed claims in the past, you might be viewed as a higher risk. Other details like the value of your mechanic tools, your specific business structure, and the coverage limits you select will also adjust the final cost.

Following these steps helps ensure you’re properly insured and set up to handle risks confidently and professionally.