Dealers Insurance – Not A Place You Expect To Get A Return On Your Investment Of Over 10%

I’m willing to bet that most car dealers out there don’t think of their insurance policy as an investment.  And the few that do probably don’t think that as an investment, their garage insurance policy will generate an investment return unless they have a loss.  But because insurance companies are always looking for ways to determine which of their clients will have losses and which will not, sometimes this search generates changes that can offer the dealer some very nice choices.  Such is the case with the paid in full discount. 

Dealers insurance is really not very different from other kinds of insurance policies when it comes to risk selection by the insurance companies.  Everyone understands that if the insurance company can tell in advance which dealers will have losses and which will not, then they will make a lot more money.   The search for just the right metric to help them determine this is a bit of a Holy Grail type search.  Now insurance companies have relied heavily on many different factors to choose which auto dealers to accept as clients and which ones to walk away from.  Some of these factors seem obvious to the lay person.  Some of the more obvious ones are the driving records of the dealers, the past loss history of the dealers or the general condition of the dealership location itself.  Others factors are less clear, like running a credit check on the dealer or refusing to insure dealers who have a buy here, pay here service on site.  But if the insurance companies have one thing going for them, it is past data.  If they can come up with a way to back check a new idea against past experience, then they will often assume that they can project this behavior and risk assessment into the future.  The paid in full discount idea was probably something that simply jumped into someone’s head one day.  They then simply had to compare the loss histories for dealers who paid in full for their garage policy against those that paid monthly or on some other schedule.  They must have found that the pay in full group had fewer losses and so this new idea was born.

Auto Owners Insurance Company, an insurance carrier who insures many dealers across many states must have made this discovery recently.  Once they knew that dealers who paid in full had fewer losses than those who used payment plans, they simply needed a way to add an incentive to these pay in full accounts so that they could attract more of them over time.  What they came up with, I think, is very generous, though it may just reflect the difference in loss histories between these two groups.   Auto Owners now allows a 10% discount to all dealers who pay in full on their garage liability and dealers blanket insurance policies. 

Now if you are a dealer and you purchase your insurance from Auto Owners, consider the math on what this means.  Saving 10% on the cost of your dealer policies by simply paying in full is like receiving a 10% return on your investment money. If you had to borrow the money from the bank to pay for your garage insurance, I doubt you would have to pay anywhere near 10% interest.    But actually the math tells us that it is even better than that.  Assume for a moment that the cost of your garage insurance policy is $1000 and you only have to pay $900 for the policy if you pay in full, then that is a quick 10% return.  But if you compare this to paying 10 monthly payments of $100 each then the return is much greater than 10%.  This is because each month that you pay off the balance, you have less and less left to invest somewhere else to obtain some return.  So in the long run a 10% discount might generate as much as 12% or more return, depending on how many payments you have and how quickly you pay off your garage policy.

Over time, this generous discount will probably go away.  That’s because although it is designed to attract the better risk dealers who usually pay in full, the incentive will now attract some of the monthly pay plan dealers as well since it is so generous.  Once that starts to happen, the risk assessment piece of the puzzle becomes less clear and over time the pay in full group’s loss history will more nearly reflect that of the monthly pay plan group.  So my advice would be to take advantage of this discount while it is still around.

Clinard Insurance Group, located in lovely Winston Salem, NC actively insures more than 300 used car dealers, all across North Carolina, South Carolina, Tennessee, Virginia and Georgia.  We would love to help you save money on your dealers insurance policies, so please call us, toll free, at 877-687-7557 or visit us on the web at www.TheAutoDealersHelper.com.   

Garage Insurance – Making The Audit Easier

If you have a garage liability insurance policy for your repair shop insurance, or for your used car dealer insurance program, then you know that your policy must be audited each year. Garage liability insurance audits can be a huge hassle or they can be a quick and easy process. Some of what determines that is up to you. Here are a few tips to make your garage policy audits go as smoothly as possible. Some of this information is based on audit requirements for Auto Owners Insurance Company garage policies and may not necessarily be part of every insurance company’s garage audit process.

Start with an accurate estimate. You will have to estimate your payroll and number of employees when you first take out the policy. Start out by making this an accurate estimate. Estimating too high takes money out of your pocket and crimps cash flow now. Estimate low makes you vulnerable to the audit trap and can hurt cash flow later. Don’t forget that clerical employees are often required to be included in the total employee count. Also, remember that active owners, partners or members are included in the total as one full time equivalent employee.

With the Auto Owners Premier Garage Policy, there are caps on the payroll basis for owners, officers, partners or members as well as for employees. Your insurance company may or may not have caps on payroll so be sure to find out well in advance about this as it can limit your preparation time and may reduce your garage liability insurance costs in the long run.

Most garage policies will not charge for strictly clerical employees. But they are also usually quite strict about the definition of clerical workers. When they say clerical, they mean that employee only engages in clerical work. Few garage operations have a strictly clerical person, but if you do, you don’t want to include them as an employee in the employee audit count and in the payroll count.

Know your categories of employees as defined by the garage policy and have those numbers ready for the auditor. Category 1 employees are usually defined as owners, officers and members as well as salespersons, sales and service managers and anyone who operates vehicles on and off premises. The payroll amount for this type of employee is usually capped and most of your payroll will fall into this category. Category 2 employees are usually defined as all other employees. Typically the payroll for this category will be very small or even zero.

By knowing what your insurance company needs from you at audit time, you should be able to reduce the time and costs of having your garage liability insurance audited each year. At Clinard Insurance Group in Winston Salem, NC, we specialize in helping used car dealers and garage and repair and body shops with their insurance policies. We write garage insurance for dealers as well as repair and body shops in North Carolina, South Carolina, Virginia, Tennessee and Georgia. If we can help you with your garage insurance, please call us toll free at 877-687-7557 and we will be glad to answer your questions.

The source information for this article comes from other articles which can be found at www.InsuranceAnswerGuy.com.

Car Dealer Insurance – The Blanket Reporting Form

Used Car Dealers with large inventory should always carry dealers open lot insurance as a part of their used car dealer insurance program. This section of the garage policy is designed to protect your inventory from losses such as wind and hail as well as collision. If you have a large inventory, especially one that fluctuates in value from time to time, then you should consider a twist to the dealers open lot coverage. The twist is a form called the dealers blanket reporting form.

With the standard dealers open lot coverage, you must choose a coverage amount that reflects your highest inventory value at any given time during the policy period. And of course, your premium is based on the amount of coverage that you choose. If you purchase too little coverage, then you run the risk of having a loss that isn’t fully covered. If you choose too high, then you might be buying more insurance than you need. This is where the dealer’s blanket reporting form can help.

When you use the reporting form on your policy, you must complete an inventory report once each month. Now the procedures and the rules for this form may vary a bit from company to company. For this example I will use the rules used by Auto Owners Insurance Company, one of our largest markets for used car dealer insurance. To start this program the insurance company will want for you to base your original limit on the average inventory value for the previous 12 months. If you are unsure of that number, then you can start with 75% of your current inventory.

There are several strong advantages of this form over the dealers open lot fixed amount form. First of all, as long as you complete and return your monthly reports on time, and as long as they are accurate, then you will have unlimited coverage. This helps smooth out the peaks and valleys in your inventory. Second of all, this form provides true blanket coverage. So if you have more than one location it won’t matter as long as your inventory report each month has the total inventory for all locations combined.

While the dealer’s blanket reporting form is not for everyone since it requires a monthly inventory report to the insurance company, it can save you money and provide more seamless protection on your inventory if you have fluctuating inventory amounts or if you have multiple locations.

Your average insurance agent will know very little about garage insurance in general and insuring used car dealers in particular. It is very important that you find an independent insurance agent who specializes in used car dealers to help you. At Clinard Insurance Group, in Winston Salem, NC, we insure over 250 used car dealers in North Carolina, South Carolina, Tennessee, Virginia and Georgia. If we can help you with your garage insurance or any other policies for your used car business, please call us, toll free at 877-687-7557 or visit us on the web at www.TheAutoDealersHelper.com.

The source information for this article was pulled from information which can be found at www.InsuranceAnswerGuy.com.

Garage Insurance – Division I or Division II?

It is often said that the garage insurance policy is one of the most misunderstood forms of insurance. The problem is that this form of insurance essentially is a hybrid of a general liability insurance policy and a business auto insurance policy. More than that though, this form is a specialized form, used only for auto body and repair shops and auto dealers. Given that, many agents, who don’t specialize in helping these specific industries with their insurance needs, don’t really understand the ins and outs of the garage insurance policy and as a result they may issue a policy to you under the wrong form. So how do you know if you have the right protection?

First of all, understand that although the garage liability policy is appropriate for both an automotive repair shop and an auto dealer, within that group, you need to have the correct classification on your garage insurance policy. There are 2 different divisions of coverage on the garage policy, Division I and Division II. These divisions not only affect the policy form itself, but they also impact on the rating structure and how your final premium is determined. For these reasons, it is important that you have your policy set up correctly in the first place whether you are buying auto dealers insurance or automotive repair insurance.

Division I is the division that should be used if your business is an auto dealership. If however, your business is automotive repair or body work, then your garage liability policy should be written as a division II garage insurance policy. If you are unsure whether or not your policy is set up correctly, you can check to see which division your policy is written on by checking the declarations page of your garage insurance policy.

What happens if you are involved in auto sales and auto repair? If that is the case, then your policy should be written on the Division I form.

As you can see, there are a lot of tripwires out there for business who repair or sale cars who are looking for a garage insurance policy. You need an insurance agent who specializes in the garage insurance policy and helping both car dealers and automotive repair shops with their insurance needs. At Clinard Insurance Group in Winston Salem, NC, we are that specialist. Our used car dealer clients and our auto and body repair shop clients are located all over NC, SC, GA, TN and Va. If we can help you with your garage insurance questions, or if you would like a quote on your current insurance program, please give us a call, toll free, at 877-687-7557 or visit us our auto repair and body shop web page or our used car dealers insurance help site.

The information used for this article can be found in its entirety at www.InsuranceAnswerGuy.com.