With all the hard work and investments of time, money and energy you’ve put into building your dealership, do you really want to sit back and take the chance that nothing bad will happen?
Accidents, injuries, crime and the resulting lawsuits hit all types of businesses large and small, franchise or family-owned. Determining your shop’s value and investigating the right kind of business insurance needed is one way to help you rest easy knowing that your dealership will be protected in the case of emergencies.
With dollars stretched tight and the constant challenge of keeping your shop running smoothly, it may be tempting to look at business insurance as one area to trim your budget. It’s a dangerous bet to assume your shop is invincible to expensive problems ranging from robbery, natural disasters and accidents to lawsuits and employee theft.
“You don’t want to get caught being unprepared if something catastrophic happens,” says Michael Jagodzinski, a business insurance and risk consulting agent with Akron, Ohio-based Evans Insurance Agency.
The good news, he says, is that business insurance rates have decreased in recent years and now is a great time to get additional coverage at a reduced cost. “Right now we’re still seeing rates decline. It’s a good time for business owners to test the market and see what’s out there, or what extra coverage they can get for much less expense than they could have a few years ago.”
Assessing your needs is the first step in determining what type of business insurance you’d like to consider. You can either do this on your own, or with the help of an insurance provider. Most providers offer free consultations or a checklist for determining your business’ value and risks. Sit down and take a thorough look at your shop the value of the tools, vehicles, inventory and the building itself, as well as the services you provide and the amount of customer traffic you typically get. Then meet with your insurance provider, who will be able to recommend the best coverage, tailored specifically for your shop.
There are several types of insurance that are a necessity for tire dealers and should serve as the base of your portfolio. These include property, liability, crime, fleet and auto, workers’ compensation and pollution insurance.
Property insurance covers the physical aspects of your business: the building, equipment, furnishings and fixtures, inventory, computers, etc.
“The business owner needs to look at the exposure he has in terms of real property, or in terms of stock and equipment if he leases the building,” says Gerry Cecil, national director of field marketing for Zurich Financial Services. “We always encourage a statement of values determining what it would cost to replace the building, stock and equipment with like-kind of quality, which is the cost it would require to replace items with similar equipment of the same value.”
In addition to the stock and the building, take a look at employee tools. Depending on the amount of service and repair that your shop provides, your employees may have significant tool investments, which should also be properly accounted for under your commercial policy, Cecil notes.
Liability insurance offers protection against injuries suffered by customers or other third parties that may occur on your property. Whether it’s a slip-and-fall in the customer waiting area, someone tripping in an aisle of your showroom or, worst-case scenario, an accident-causing wheel-off, liability insurance will come in handy in the case of paying medical expenses or worse, in the case of a lawsuit. It also includes the products or completed operations claims that could occur as a result of the work your employees perform.
“It’s key to have proper signage to keep customers out of service areas, as well as proper controls for various service procedures like tire and wheel removal and proper torqueing,” Cecil says.
There’s also a specific type of liability insurance called garage keeper’s insurance, which is important to any tire dealership and service shop. This coverage protects you against physical damage to a customer’s vehicle that occurs while in your shop’s care, custody or control. “If the vehicle is damaged in the process of servicing it, test driving it, or just moving it around the parking lot, that would be picked up under garage keeper’s coverage,” Cecil says.
Garage keeper’s coverage also includes any vandalism or break-ins that could happen to customers’ vehicles while in your possession, Jagodzinski notes.
Under garage keeper’s insurance is another form of added coverage direct primary insurance. This could come in handy if a customer cannot prove your shop is at fault for a problem with their vehicle (which is required for standard garage keeper’s insurance), but you want to help cover the costs of that problem as a goodwill gesture and an attempt to keep a valued customer.
“If a customer gets into an accident and cites improper work done at your shop as the cause but this cannot be proven, you are not responsible for paying any damages,” Jagodzinski says. “But with direct primary insurance, you can work with that person’s insurance provider and offer payment assistance as a goodwill gesture to keep that customer happy.”
While property insurance guards against burglary and theft from third parties, crime insurance protects specifically against employee dishonesty.
“This is beyond someone taking money out of the register,” Cecil says. “It could involve an individual forwarding products to a separate address or selling them to a fictitious buyer. It also covers computer fraud, which is often a function of how much business a shop does over the Internet.”
Fleet and auto insurance policies cover shop-owned vehicles used for deliveries or as customer shuttles. Most people wouldn’t dream of driving their personal vehicles without insurance, and commercial ones are no different. Even if you have personal auto insurance, you still need commercial auto insurance because vehicles involved in an accident while engaged in company business may not be covered by your personal insurance.
You also need to discuss the options available if your employees use their own vehicles to run business-related errands or make deliveries, or rented vehicles if your employees need to rent cars while traveling.
Workers’ compensation insurance covers medical care and wage compensation for employees who are injured in accidents, while protecting you from lawsuits at the same time. In most states, businesses are required to buy workers’ comp insurance. The insurance covers workers injured on the job, whether they’re hurt on the workplace premises or elsewhere, or in auto accidents while on business. It also covers work-related illnesses.
Specific to businesses in which hazardous materials are a daily part of the job, pollution insurance guards against spills affecting nearby property or damage from pollutants after they’ve been removed from your shop.
“In this business there’s pollution exposure because you’re generating hazardous waste oil, hydraulic fluids, antifreeze, scrap tires, etc.,” says Cecil. “We’ve seen some instances of pollution disposal facilities being compromised and they’ve leaked and caused damage to adjoining properties or underground water supplies. If this results in a lawsuit, each potentially responsible party could be involved, and you’ve got to spend a lot of money to defend yourself and extract yourself from that.
“A pollution liability policy would cover businesses for a problem on-site when they spill a pollutant onto an adjoining property, or if a shop is brought in as a potentially responsible party with respect to an improper disposal site,” he continues.
In addition to the basic insurance coverage discussed above, there are a few extra options you may want to investigate.
Business interruption coverage can come in handy if something drastic happens that makes it impossible for you to conduct business in your shop. While the building and its contents are protected by property insurance, these additional options will enable you to keep employees on payroll and still receive what limited profits are available while you work to recover your business, according to Cecil.
“This will allow the damaged shop to still be a viable business six months later, or up to 12 months later, until they can rebuild the structure,” he says.
If your shop has contracts with local governments or companies to service their fleets, extra expense coverage will help in allowing you to honor those contracts while your shop is being repaired or rebuilt. “By paying for the necessary added expenses, this would enable a business to operate temporarily from a separate location while getting the original location up and running. That also comes into play with a multi-location operation, where you can move the business from one shop to another,” Cecil says.
Because of the high cost and your shop’s reliance upon computers, phone systems, diagnostic equipment and heating and air conditioning equipment, mechanical breakdowns of systems like these can be covered under breakdown insurance. In the event of a malfunction, repairs or replacements to entire systems can quickly become costly, making breakdown insurance a viable option.
Cargo coverage is an added option that is typically for multi-location operations, but could also apply to a single shop if company vehicles are used for deliveries to customers or pickups from local suppliers. This protects the parts and other items being carried in your shop’s vehicles as they’re being moved from site to site, Cecil notes.
Once you’ve determined the worth of your business and the risks you face, meet with your insurance provider to determine the best plan for your dealership.
“A good agent will do comparison shopping and get competitive bids for you,” says Jagodzinski. “It’s a good idea to revisit your insurance needs every few years, as well. Your exposures can change as your business changes and grows, so it’s important to reevaluate it so there are no surprises down the road.”
In order to reduce your premiums and get the best possible coverage, it’s also important to establish rules and procedures regarding shop safety and operations, Cecil says.
Set in writing the management philosophies that are implemented by how you hire, train and manage your employees. Create specific instructions on proper service procedures like mounting and demounting tires or setting the correct torque levels, as well as written policies for using company vehicles, he notes.
Some insurance providers, including Zurich, offer more attractive pricing or lower deductibles based on the training and certification levels of your staff. “For example, we hold TIA’s Automotive Tire Service and Commercial Tire Service training in pretty high regard we look for that in our customers and we reward them by offering a lower deductible if they have so many certified employees.”
In order to lower your monthly premiums, you could also look into increasing your deductible. This applies more to larger businesses or multi-location shops with larger budgets, Jagodzinski says.
“If you need to save some money, don’t skimp by taking a building that’s worth $400,000 and insuring it for only $300,000,” Cecil says. “Rather, look at taking the deductible from $500 to $1,000 or $2,500. You’re still protecting yourself for the catastrophic event, while lowering your monthly payment.”
The thing to remember about business insurance is that it requires planning and careful attention in order to work to your benefit. Staying on top of things and carefully assessing your needs will save you time and money in the long run.
“No one seems to want to go through the process just because it’s time-consuming, but if you have everything laid out in front of you before the loss, it makes the claim go that much quicker and smoother,” Jagodzinski says.
“At the end of the day, this isn’t just an incidental expense,” explains Cecil. “Many years ago, insurance used to be something you handed to your local friend in the business and you assumed everything was going to be fine. Today, a dealer really needs to be engaged in the process. Every dollar counts, now more than ever. You can’t make a business thrive with insurance-related expense reduction, but you can certainly make it survive.”