Coverage requirements
New & Used Car Dealerships
Last updated August 2026 · Maintained and reviewed by the Advocate Insurance Consultants coverage research team.
Overview
What an adequately protected New & Used Car Dealerships program looks like
Automobile dealers sell new and used vehicles to the general public. Automobile liability, automobile physical damage, and garage keeper's legal liability are the leading exposures, including defective vehicles subject to recall, theft of inventory, and accidents during test drives. For new & used car dealerships, this Advocate Standard profile benchmarks Auto Liability, Auto Physical Damage, General Liability, Garage Keepers Liability, Worker's Compensation, aligning limits, deductibles, and carrier-quality standards to the exposures that most threaten continuity.
Key takeaways
- Spans 141 published requirements across 41 coverage type-peril pairs.
- Applies to 2 asset types: Retail - Generic, Retailer.
- Covers 15 coverage types and 14 distinct perils.
At a glance
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Completion score
9 of 41 WIM pairs required
Coverage tower
Required limits by coverage type and peril
Requirements
Full requirement set for New & Used Car Dealerships
Every requirement in the Advocate standard, 141 rows across limits, deductibles, carrier rating, and presence checks. Search and filter to drill in.
Showing 50 of 141 matching · 141 total
Compliance
Who requires New & Used Car Dealerships
- Floor-plan lenders financing vehicle inventory require dealer open-lot physical damage coverage on the financed units and insist on being named loss payee.
- State DMVs require a motor vehicle dealer bond and proof of garage liability before issuing or renewing a dealer license.
- Franchisors granting a new-car franchise set minimum liability limits in the dealer agreement, and manufacturers add garagekeepers expectations for service departments.
- Behind the lot, landlords and lenders have their interests noted on the property coverage.
- Because customers leave vehicles for service and take cars on test drives, garagekeepers and auto liability coverage are relied on daily by customers, lenders, and licensing authorities alike.
Carrier standard. Carrier must have AM Best rating >= A- and size >= VII.
Advocate runs these checks automatically for the brokers who place retail coverage.
Exclusions
What New & Used Car Dealerships does not cover
- The coverage includes auto, auto physical damage, general liability, and garagekeepers, but coordination is where gaps appear.
- Garagekeepers must be sized to the fullest lot of customer vehicles in service, not a token limit, since general liability excludes damage to vehicles in the dealer's care.
- Dealer open-lot coverage on financed inventory is separate from ordinary property and must list the floor-plan lender as loss payee.
- The DMV dealer bond is not insurance.
- Dealership programs typically exclude pollution tied to fuels and shop fluids, defective repair workmanship, and flood or earthquake damage to the lot.
- Diminished value, dealer errors and omissions on financing and title work, and cyber breaches of customer credit data fall outside a base package.
Risk advisory
Typical coverage gaps in Retail
New and used car dealerships should confirm garagekeepers limits cover the maximum value of customer vehicles in the service lane at peak, because a shop fire, hailstorm, or theft can damage many customer cars at once.
- Verify dealer open-lot physical damage matches floor-plan requirements at full inventory value with the lender named loss payee, and keep the DMV dealer bond current and distinct from insurance.
- Auto liability should clearly cover test drives, loaners, and dealer-plated vehicles.
- Add pollution coverage for shop fluids and a garage errors-and-omissions form for financing, title, and disclosure disputes.
- Cyber liability is essential given the credit applications and personal data dealerships store.
- Finally, size business income to reflect the revenue lost if the showroom or service department closes.
FAQ
Frequently asked questions
Do car dealerships need garagekeepers insurance?
Yes. Every customer vehicle left for service, detailing, or storage is in the dealership's care, custody, and control, which general liability excludes. Garagekeepers coverage pays for damage to those vehicles from fire, theft, collision, hail, or technician error, and the limit should reflect the busiest service lot, not just one car.
What is floor-plan insurance for a car dealership?
Floor-plan or dealer open-lot coverage insures financed inventory on the lot against physical damage such as fire, hail, theft, and vandalism. The floor-plan lender that finances the vehicles requires this coverage and must be named loss payee, protecting both the dealer and the lender's stake if inventory is damaged.
Does a car dealer need a surety bond?
Yes. State DMVs require a motor vehicle dealer bond, typically $25,000 to $100,000 depending on the state, before issuing a dealer license. The bond guarantees the dealer will comply with sales and title laws and reimburses harmed customers or the state. It is required alongside, not instead of, garage and auto coverage.
What insurance does a used car dealership need?
A used car dealership needs garage liability, garagekeepers for customer vehicles, dealer open-lot physical damage for financed inventory, auto liability covering test drives and dealer plates, a DMV dealer bond, workers' compensation, pollution coverage for shop fluids, garage errors and omissions, and cyber liability for customer credit data.
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