The state of Minnesota, like many others, regulates vehicle-related business like new and used auto dealerships. The Minnesota Driver and Vehicle services department advices that owners of these businesses advise that there are additional regulations and requirements at the state, county and federal level that need to be followed. That’s why there is auto dealer insurance.
If you are considering starting a used or new car dealership then it is likely you are in the process of researching the auto industry so that you understand the specific regulations that apply. There are a number of different things to consider before anything else.
First there is the decision between retail and wholesale dealerships. As a retail dealer you will only be allowed to sell to the public, while wholesalers sell to the others. There are different licensing, advertising and zoning laws that apply to retailers that are wholesalers so it is important to understand that.
Owning a car dealership is not as simple as owning any business, because in addition to needing general business licensing requirements, you will also be required to obtain a dealers license. Individuals are permitted to sell a limited number of cars without a license. This is why people are allowed to post a for sale sign on the car sitting in their front driveway. If you are starting a dealership, then you will not want to risk running it without a car dealer license to adhere to consumer right and safety laws. Failure to have a license can result in criminal penalties and hefty fines. To obtain a dealers license, you can contact the Minnesota State department of motor vehicles office. Most states will require that the applicant take a test, ensuring they understand the rules and regulations of the industry.
New and used car dealerships do require a form of insurance, providing sufficient insurance coverage including general liability, lot and comprehensive plans. The business sides of the car dealer insurance functions like many business insurance policies. It protects the business owner from any liability it may face as well as protects the business property from any damage or vandalism. In addition you will need specific dealer’s coverages such as garage keepers legal liability which covers your customers cars in your care custody and control. You also need dealer’s open lot coverage for the physical damage on your inventory inside and outside. Your garage liability coverage should include operations and completed operations.
In addition to the business insurance, car dealer owners need to have a surety bond, which is a type of insurance that guarantees performance of a contract. Surety bonds are used to assure customers satisfying delivery of their product, and in the case of a car dealer, it safeguards your transactions with the wholesaler that you purchase your cars from.
In Minnesota all car dealers must be licensed. New and used vehicle dealer’s licenses must have commercial buildings on a permanent foundation and office space for records. Used car dealers must have a person to answer the telephone and wholesale dealers must have an office as well. The site will be inspected before receiving a dealer license.
To learn more about new and used car dealer insurance you should contact your local independent commercial insurance agent to ensure that they are following the state’s regulations.
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