Why Your Commercial Dealership Insurance Can Get Canceled

Securing commercial dealership insurance is tough enough between knowing the coverages to get for your specific business model and then shopping for the best deal. Now imagine the nightmare if it gets canceled. 

Dealerships can simply NOT be without this critical insurance to protect their business, their reputation in the community, and the livelihoods of their employees. 

So, what if the worst happens?? How likely is this scenario and why would it happen?

Let’s walk through a few scenarios that can lead to the cancellation of your commercial dealership insurance coverage:

• Excessive claims - Just like our personal auto or homeowners policies, if you are filing for more claims than is customary, an insurer will view you as a risk. Insurance companies in general run razor thin margins for profit as a rule and paying out more than they take in on a single policy of any type hurts their bottom line. Before you file a claim, be sure it’s legitimate and truly warrants the filing. 

• Premium non-payment - This seems straightforward…pay your premiums on time. If you don’t, an insurer won’t hesitate to shut down the policy. This is often the primary reason for cancellation and there is very little recourse as payment terms are spelled out clearly when you buy the coverage.

• Increased risk  - If your dealership undergoes changes that significantly increase risk without first informing the insurer, such as adding high-risk services or more expensive vehicles without the appropriate policy adjustment, the insurer will likely cancel. You can’t go from a simple 30-car lot filled with $10k cars and change to an exotic dealer with 60 cars and a repair bay without letting your insurer know that a major change to your business has happened. You’re asking for trouble.

• Fraud of Misrepresentation - Providing false application information to your insurer at the time of quote/purchase can lead to immediate cancellation. Your insurer relies on accurate and detailed information to assess risk and determine premiums…honesty must be the first priority. There’s no justification for misrepresenting our business model or where you’ll be operating. 

• Criminal activities - Engaging in illegal activities on the dealership premises or using your business for any unlawful purposes can result in your insurer canceling your coverage immediately and often without any chance for reinstatement or appeal. Again, it seems almost too obvious to list here but cases like this pop up all the time as dealers think they can file claims against staged lot thefts or some other fraud to get an ill-gotten payout from their insurer or had drug operations in the garage after hours, etc. Any criminal activities discovered will almost always result in losing your commercial insurance protection.

• Non-compliance of safety regulations - Failure to comply with safety regulations or ignoring recommendations made by your insurer after reports of incidents or audits can also result in a policy cancellation. Those recommendations are given to help protect your dealership from losing a policy or having rates increase so it’s better to take action on them rather than ignore it. 

Next time we’ll look at what it looks like when an insurer is canceling or about to cancel your policy and what you can do about it.

Bottom line…don’t give your insurer any reason to cancel your coverage. Watch for these scenarios and have processes and procedures in place to guard against them. Insurance companies in the last few years have been scaling back in many markets like home and personal auto but there are still plenty of commercial providers that will help you protect your dealership from the risks, big and small. 

DealerSure is here to make sure your business is protected and has access to the insurers that specialize in protecting dealers like you. Reach out here and let us help you find the policy and coverage that is best for your specific dealership.