What You Need and Don’t Need in Your Garage Dealers Insurance Program

For many independent automobile dealers, insurance represents one of the largest operating expenses after inventory and payroll. Yet despite its importance, many dealerships continue to struggle with a fundamental question: How much insurance is enough?

The answer may surprise you.

The goal isn't necessarily to purchase more insurance. The goal is to purchase the right insurance.

Every dealership is different. Inventory size, operations, staffing, service activities, and customer exposure all play a role in determining the coverage a dealer truly needs. Unfortunately, many policies are built using generic templates that fail to reflect the unique risks of an individual operation.

A properly designed insurance program should focus on protecting the dealership's most significant exposures while eliminating unnecessary costs and coverage overlaps.

THE CORE COVERAGES EVERY DEALER SHOULD REVIEW
Most dealerships should begin by evaluating five fundamental areas of protection.

• Garage Liability serves as the foundation of a dealer’s insurance program. It protects against bodily injury and property damage claims arising from daily operations, customer visits, and vehicle-related incidents.
• Dealer Open Lot Coverage protects vehicle inventory from covered losses such as theft, fire, vandalism, hail, and other physical damage events. As inventory values continue to fluctuate, maintaining accurate limits has become increasingly important.
• Garagekeepers Coverage protects customer vehicles while they are in the dealer’s care, custody, or control. Whether vehicles are being serviced, detailed, stored, or test-driven, this coverage can help prevent costly out-of-pocket losses.

COVERAGES WORTH CONSIDERING
Beyond the basics, some dealerships may benefit from additional protection depending on their operations.

False Pretense Protection can help address losses resulting from fraudulent purchases, counterfeit checks, identity theft, and certain wire transfer schemes.

Employment Practices Liability Insurance (EPLI) provides protection against allegations involving discrimination, harassment, wrongful termination, and retaliation.

Umbrella Liability Coverage extends liability protection above primary policy limits and can provide valuable protection against catastrophic claims.

The key is understanding which coverages align with your actual exposure—not simply adding endorsements because they are available.

WHEN MORE COVERAGE ISN’T BETTER
One of the most common mistakes dealers make is assuming that more insurance automatically means better protection.

In reality, over-insuring certain assets or purchasing endorsements that do not align with the dealership’s operations can create unnecessary expense without providing meaningful value.

For example, dealerships that do not perform repair operations may not require the same coverage structure as a dealership with a full- service department. Likewise, policy limits should reflect realistic replacement values rather than arbitrary figures that increase premium costs.

Insurance should be customized—not copied from another dealership’s program.

THE BOTTOM LINE
The strongest insurance programs are designed around a dealership’s actual business model, not a one-size-fits-all approach.

A periodic review of inventory values, operations, staffing, and emerging risks can help identify coverage gaps, eliminate unnecessary expense, and ensure the dealership remains protected against today’s most significant exposures.

As the automotive industry continues to evolve, dealers who take a proactive approach to risk management will be better positioned to protect their businesses, their employees, and their long-term profitability.

DEALER PROTECTION TAKEAWAY
“The best insurance program isn’t necessarily the cheapest, nor is it the one with the most coverage. It’s the one designed specifically for your operation, your risks, and your goals.”

ABOUT THE AUTHOR
Robert Johnson is President of ISC Coverage, an insurance and risk management advisory firm serving independent automobile dealers throughout the Mid-Atlantic region.