Running an auto dealership, even one who specializes solely in used cars, requires quite a bit of insurance protection. This protection isn’t just for you, but also for your buyers. After all, they need to know that you’re covered, and you won’t try to give them a hard time should something go wrong with their recent purchase. Of course, this helps you out as well, since you won’t be stuck paying out of pocket should the recently sold car have more issues than you thought.
Wondering to protect your dealership in these situations? Surety bonds are the key to proactively protecting your company and its bank account.
What Are Surety Bonds?
A surety bond is a little like an insurance policy, but different, because the requirements are a bit stricter. Additionally, a surety bond is only paid out after an investigation by the company that holds the bond, which is a little more complicated than the standard insurance claim process. For example, in most states, you need to have a surety bond in place in order to sell used vehicles. This way, if you sell a car that turns out to be a “lemon” (meaning it has numerous issues), the person who purchased it can make a claim against your bond. If the allegations turn out to be true, then the bond company pays the purchaser an amount of money, decided on by the amount of the bond and the numerical value of the issues.
Reporting to the Government
Unlike traditional insurance plans, surety bonds need to be reported to your state’s attorney general. Otherwise, you won’t be operating legally. They will be kept in the loop should a claim be filed against your bond, as well as informed of the results of that investigation. If it turns out that your company did something wrong and the bond amount needs to be paid out, the attorney general’s office will keep an eye on that as well. This can affect your ability to continue to do business, based on the severity of the penalties and the number of bonds that end up having to be paid out.
How Do You Buy Surety Bonds?
If you need to purchase a surety bond, you’ll need to either contact your local insurance agent or reach out to a specialty company that manages bond sales. You’ll end up paying a percentage of the bond based on your company’s credit score. Depending on how high your score, you could end up paying as little as 1 to 2 percent of the overall bond amount as your premium. Of course, this goes up based on a number of factors, including other bonds paid out and your credit rating.
Have Questions? Contact Charlotte Insurance
Want to learn more about the importance of surety bonds for used car dealers? Contact Charlotte Insurance. Our agents can explore and explain all available options and put together the insurance coverage plan your business needs.