Insurance Requirements for New and Used Car Dealership Businesses
- Nate Jones, CPCU, ARM, CLCS, AU
- 2 days ago
- 2 min read
Whether you’re launching a new car dealership or expanding an existing used dealership, one of the most important steps is securing the proper car dealership business insurance. State licensing boards, lenders, floor-plan providers, and property owners all expect dealers to carry specific insurance policies before opening their doors. Understanding these requirements not only ensures compliance, it also protects your inventory, employees, and customers.
Here are the key insurance requirements every dealership must meet.
1. Garage Liability Insurance (Required in Most States)
Garage liability is the foundational policy for both new and used dealerships. It protects your business from:
Bodily injury on your property
Property damage caused by your operations
Test drive liability
Many state dealer licensing departments require proof of garage liability before issuing a dealer license. Dealers can verify specific state requirements through their state Department of Motor Vehicles (DMV) or dealer licensing agency.
If you floor-plan vehicles or maintain a large inventory, your lender may require DOL coverage. This policy protects dealership inventory against:
Theft
Fire
Vandalism
Hail and weather damage
Floor-plan lenders such as NextGear or Ally typically require dealers to show proof of adequate limits before releasing funds.
Any dealership that services, repairs, details, or stores customer vehicles must carry garage keepers. This covers customer vehicles in your care, custody, or control.
Typical operations requiring garage keepers include:
Service centers
Reconditioning
Detailing
Warranty repairs
Dealers can explore coverage definitions through resources like the Insurance Information Institute, which provides general commercial insurance guidance.
If your dealership has employees, most states mandate workers' compensation insurance. This applies to:
Sales personnel
Technicians
Porters
Lot attendants
Failure to carry workers' comp can result in fines or license suspension.
Dealerships leasing or financing property are often required to carry property insurance for:
Buildings
Tools and equipment
Office contents
Signage
Service department machinery
Landlords and lenders usually specify minimum required limits.
Get the Right Insurance Requirements in Place for Your Dealership
Not every insurance company specialises in dealership coverage, and requirements vary based on state law, property contracts, lenders, and inventory levels. Wexford Insurance partners with top carriers that understand dealership operations, helping owners secure the proper limits, deductibles, and policy forms required to stay compliant and protected.
👉 Request your car dealership business insurance quote from Wexford Insurance today and make sure your dealership meets all insurance requirements, while staying fully protected.
