Some people see the glass half empty, and others see it half full. But when it comes to insurance, there’s typically only one way to look at it: Are you covered or not? While some insurance companies say they’ll save you a bundle in no time, the unfortunate truth is you usually get what you pay for which may leave your dealership vulnerable to coverage gaps.
In our experience, dealers often don’t fully understand what they need when it comes to buying insurance. A lot of dealers just say, “I need an insurance policy,” or “I need an open lot policy or a garage policy,” and hope that their agent does an adequate job of inquiring about their business.
However, if you go to offsite shows or events you may not have coverage outside of your location or for the transportation to the event. Therefore, it’s important to ask your agent as much as you can because he or she may not know exactly what you do and what to ask you. The bottom line is only you know your business and all of its intricacies.
Your insurance agent is going to ask you a few things, generally, about your business. Mostly things such as how many employees you have, how many techs you have, etc. But there are a lot of little nuances in your business that you need to make sure are covered. Who’s going to be driving your vehicles, for instance? Is it just for business or personal? Who is supposed to be covered? When are they covered? Where are they covered? And what are they actually covered for?
A specific standard policy form “generally speaking” provides coverage unless it is excluded, so I highly recommended you check with your agent to see what kind of exclusions are included in your policy that you should know about. People in California found out the hard way that earthquakes were not covered. And the damage caused by Hurricane Katrina, resulted in many lawsuits. Was it by wind or flood damage? If it was a flood that caused the damage, you weren’t covered. But if it was wind that caused the damage, you were covered. If the wind allowed the water to come in and cause the damage then you were covered because of that.
All these things are little nuances you need to know for your particular policy or you could be left out in the cold. Consequently, this is why it’s important to sit with your agent and ask what kind of things are excluded or where you have minimal limits?
Knowing where the holes are in your coverage is key for dealers. You can get an open lot policy that has a deductible for the policy, or you can get an open lot policy that is sold with a deductible per vehicle. How is my deductible applied? If you have a deductible per vehicle and you sell scooters, let’s say, and you’ve got 75 or 80 scooters sitting on your lot and, heaven forbid, a hurricane or tornado wipes everything out. The scooters may only cost you $600 but your deductible is $500. In this case you don’t have any real coverage. You’ll get a check for $7,500 or $8,000. However, if you have a policy that has a deductible per occurrence of $3,000 then you would have much better coverage.
Most people (dealers included) buy insurance like a commodity on price alone and don’t really look at what they are getting. If you had a policy with ABC Company for 10 years and all of a sudden some agent walks in and proclaims, ‘I can beat their price by 20 percent.’ You would probably say, ‘Great! Sign me up!’ But did you ask if all of the coverages from your old policy were added to the new one?
Beware of the insurance that is a lot less than what you may have had. It may save you some money at first, but there is something missing. Let’s say you want to go out and rent a motorhome, for instance (looking at my core business), and we say you’ve got to go to your ABC insurance to get a binder so you’re covered while you rent this motorhome. But that company doesn’t cover motorhomes. So now you’ve got to go online and get additional coverage. But you didn’t know that when you switched to this company.
No matter what company you ultimately choose, you’ve got to do your homework with your insurance because there is no such thing as a free lunch. There’s no free lunch in insurance. No free lunch pretty much in life. And when some company comes in and says they’re going to save you a significant amount that you say ‘Wow, that’s a good deal!’ Beware. There’s a reason you’re saving a lot of money. The insurance companies aren’t out to give away coverage.
There isn’t an insurance company out there that has found ways to give you the same coverage for 20 percent less. They are either buying your business for the first year and they’re going to raise your rates or they are reducing the amount of coverage you’re getting. Or they raise your deductible or there’s something. If they say they’ll save you that much there’s a reason why and something is different that will explain why it’s that much less expensive.
Everybody looks at the cost of their policy and only compares them that way. But you really need to look into why it costs less. We (insurance companies) want to save you money, but you need to know what you’re buying. When there’s a loss or a problem, that’s when people often pull out the policy for the first time and read it. But that’s the wrong time to do it, obviously. Everybody does this.
Stay tuned for future installments of Five Minutes With Your Insurance Man where we will cover topics from rental insurance to trailering.
Bert Alanko is the owner and founder of MBA Insurance. MBA serves 2,300 RV and powersports dealers nationwide. For more, visit www.mbainsurance.net.