Let's Talk Dealers Open Lot (DOL) Coverage

There is no way to completely explore all the details of the various inventory insurance policies available in one discussion.  So, we’ll touch on just the high spots and I’ll encourage you again to work with an agent who understands the auto dealer business.

PERILS:

1. Too many dealers do not realize they lack protection from weather perils UNTIL they are hit by a flood or hail storm.
2. Losses due to weather are more often than not rated on a separate basis AND are subject to different deductibles than other dangers.
3. It is becoming more difficult to find companies with insurance programs including weather losses as covered perils.
4. Hail is often excluded in certain counties and, in some programs, statewide.
5. Theft is another danger one needs to watch closely when choosing inventory protection. Check out the deductible and restrictions applicable to that protection.
6. Look at the mileage allowance. Is it 300 miles, 500 miles or nationwide?
7. Are contract drivers included in the security provided? Must they be listed?  Are there age restrictions?
8. Must you be insured to 100% of inventory investment to prevent a coinsurance penalty in the event of a claim?

Illustration:

You carry $100,000 in inventory physical damage coverage.  You attend an auction or otherwise obtain an additional $20,000 in vehicle investment.  There is a hailstorm before you have an opportunity to report the additional inventory to your insurance carrier.  Only one vehicle is damaged:  $15000 less deductible would be the normal payment if coinsurance requirements were met.  In this instance, $15,000 x .80 = $12,000 – deductible = claim reimbursement.

The same formula would be used if your entire inventory suffered loss.

There are ways to lessen this exposure with a policy that only requires 80% of inventory insured to satisfy a coinsurance penalty; OR a reporting form if the monthly numbers are highly volatile; or a contract insuring only financed or non-financed vehicles; or perhaps some other limiting factor applicable to claim payments, such as insuring only vehicles valued at $15,000 or more – or any specific number.  Some inventory policies can be modified in many ways benefiting the dealer.

OTHER ‘GOTCHAS’

1. Do you need false pretense coverage?
2. What about a specifically scheduled vehicle?
3. How much coverage is afforded for an unnamed location?
4. What about unaccompanied test drives?
5. What are the age requirements?
6. And the list goes on.

Every dealer’s operation is unique in some way, whether it is the business plan, the employee make-up, or a dozen other things.

The least expensive and most appropriate protection is best determined by working with an agent who specializes in your niche market and has the desire to understand your insurance budget, needs and choices.