Now that you understand the basics of Garage insurance and how to fuel more business in this niche market, let's take a more in-depth look at some of the issues and additional garage coverages to discuss with your clients.

Here are five things to remember from Ronda Henley, Garage unit lead underwriter and manager at RPS, to help you better protect your clients.

1. All Employees Should Be on the Policy

Remember this: All (and we mean all!) employees must be reported during the underwriting process for Garage insurance. This includes owners, employees and 1099 contractors who aren't required to carry their own insurance.

"The rating exposure on the Garage policy is based on all employees — whether they're clerical workers, mechanics, salespeople or contract drivers," says Henley.

2. Explain the Coinsurance Factor on a Dealers' Open Lot Policy

Dealers' Open Lot insurance provides physical damage coverage for an insured's vehicle inventory. A coinsurance requirement of 100% of the inventory value applies. If at any point during the policy term 100% of the inventory's value is not insured and there's a loss, a coinsurance penalty will apply.

"Unfortunately, many clients don't understand coinsurance and often end up underinsured," explains Henley. "Since the policy is written on a non-reporting form, the insured doesn't report inventory values on a monthly basis. It's critical to explain when the coverage is being quoted that it's subject to coinsurance, and the maximum inventory value should be provided in order to be properly insured."

Henley continues, "If, for example, the insured claims that the operation's inventory value is $100,000, for adequate coverage the inventory value cannot exceed this amount at any given time during the policy term. Even if one vehicle suffers a loss, the carrier will request an inventory value. If the inventory value at the time of the loss is, let's say, $200,000, a 50% coinsurance penalty will be applied to the loss less the deductible."

Henley suggests you have your clients look at their busiest time of year to determine their maximum inventory value.

3. Keyless Entry Invites More Auto Theft

As more and more vehicles use key fobs, there has been a rise in thefts on dealer lots.

"Providing a key fob to potential customers puts the fob at risk for copying or swapping," explains Henley. "A bad actor will ask to test drive a car and, upon returning the key fob to the salesperson, will hand over a swapped-out fake fob. The thief will return after hours to steal the car with the correct fob."

Auto dealers should either mark their key fobs with their unique brand or require that fobs never be handed over to anyone. Salespeople should monitor the key fob while the customer starts the vehicle.

4. Enhance the Garage Policy with Additional Options

Optional coverages are available to further protect an insured's operations:

  • Dealers Errors and Omissions (E&O) extends Liability coverage to include damages arising from error or omission in compliance with federal, state or local statutory provisions. For example, these provisions require disclosure of credit terms to consumers using credit to buy a vehicle. The actual mileage on the vehicle must also be disclosed to consumers buying a vehicle. An error or omission involving the information in these disclosures could result in an E&O claim.
  • False Pretense adds coverage to protect the dealer from unscrupulous sellers and buyers. For example, let's say a dealer unknowingly purchases a car with a fraudulent title, and the real owner tracks the vehicle to the dealer's lot and wants the car returned. Or the dealer may have already sold the car and now has to reimburse the client and return the car to the rightful owner.

You can also add to the Garage policy with Premises and Auto Medical Payments, Uninsured Motorists, and Broad coverage, to include Personal Advertising Injury and Fire Legal Liability insurance.

5. Go Over Exclusions!

Henley stresses the need for agents and brokers to go over all Garage forms with clients, including the exclusions that apply. Exclusions vary based on the insurer, so it's important that clients understand what is and isn't covered in the policy.

Keeping these five items in mind during Garage coverage discussions will not only ensure your clients are covered, it'll make you look like a Garage mastermind.

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