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Thinking About Hail Coverage For Your Inventory? Here Are A Few Things To Consider


Recently, TIADA heard from a few dealers whose vehicles were damaged due to a hail storm that passed through portions of Texas.

Recently, TIADA heard from a few dealers whose vehicles were damaged due to a hail storm that passed through portions of Texas. We reached out to a few insurance companies who shared some insight on hail coverage and a few questions dealers should consider. 

Dealers open lot (DOL) or dealers physical damage coverage is designed to cover any physical damage or loss of vehicle that the dealership owns. That can include a vehicle that is in your inventory for sale, a car an owner or employee drives and so on. Basically, if it's tied to the dealership, this coverage is designed to cover that kind of damage. The coverage might include theft, fire, vandalism and then the “big ones” are wind, hail and flood because these are catastrophic. These weather perils are considered separately from all other perils. 

When thinking about dealers open lot coverage, a few questions to ask include: 
 
Do I have a carrier that could write all of my insurance, including DOL?
Physical damage may be able to be written into one's overall insurance package. For instance, if a dealer has liability insurance, there are still some carriers who will write DOL as part of the package. Bundling your insurance may offer discounts and help streamline the process in the event of a claim.

What about self-insuring? 
‘Whatever happens to your vehicle, whether due to theft or hail, are you okay with replacing those vehicles out of your pocket?' This is one of the underlying questions dealers should ask themselves, said Mike Mitchell with Williams & Stazzone Insurance Agency. Some dealers may not be as concerned about coverage if the value of the vehicle is relatively low or if they do body work in-house where repair costs could be reduced.

How can I even begin to assess the amount of coverage I might need?
Consider your total maximum amount of inventory of all vehicles on your lot. What is the average wholesale value per car? Determine the average number of cars you keep at any given time (on a given month).

Does this policy require that I be 100% insured?
Some do, while other policies require only 80%. If a dealer is underinsured, there could be a hefty penalty in the event of the claim, and you won't get the full payout that you might be expecting. Example:  You're required to be insured 100%, but instead, you're insured for $250,000 and you have $500,000 at time of loss—that would mean you're 50% underinsured. As a result, under this policy, you could be penalized 50% of what insurance was going to pay. You would receive $125,000 or less.

Any exclusions? 
Ask about any exclusions, particularly those that are of concern to you. For instance, Mitchell says they have seen an uptick in theft and false pretense claims recently, so it is important to ask about exclusions to be absolutely sure what is and is not included with any policy. Some examples of possible exclusions include flood, theft, false pretense, and weather perils (e.g., wind and hail).

Understanding the claims process
When going over the details of the package, Alex Kubicek with Understory suggests that dealers make sure they understand the claims process and how the payout is assessed. It should be a transparent process, added Kubicek.

Supplemental Coverage

An alternative to having hail coverage written into your traditional insurance package is securing supplemental coverage. One such product, known as Auto-Hail Safe, was recently introduced in Texas to offer auto dealers coverage specifically for hail. With this type of coverage, no adjusters would be showing up at your door. Instead, the product works more like life insurance, described Understory's Alex Kubicek. Say there's a hail storm at your location, the insurance pays out based on the parameters selected by you, the dealer.  

 
Photo of Understory's Dot weather station atop a dealership, which powers the company's parametric hail insurance product for dealerships

Managing Risk:

Hail coverage can be costly, leaving some dealers looking for other ways to reduce risk of hail damage. Keeping inventory in a building or investing in hail nets or canopies can help protect inventory. “Both of these items will significantly reduce the cost of hail insurance and I encourage either and/or both as ways to lessen a dealer's exposure to a catastrophic hail storm,” said Ann Mullen-Martin with Mullen Insurance Agency. Dealers who have hail nets or other means of protecting their inventory would want to make sure to mention that to their agents; doing so could help reduce your premium, added Mitchell.

At the end of the day, there are a number of factors each dealer should assess when considering hail coverage. These are just a few. Consult with your agent to learn about other considerations and what options might be the best fit for you and your business.

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