No matter what side of the ideological fence you fall on, climate change is one of many factors that can impact your dealership. Wildfires if you operate in drought-stricken states, tornados if your lot is in the Midwest, and now with the first major named hurricane to hit the US (and more predicted for the rest of the season), now is probably a good time to make sure you have Business Interruption Insurance in place and ready to protect you.
And that’s just naturally occurring weather events…there are a host of issues not related to weather that can impact your dealerships’ ability to function daily. The financial impact can be catastrophic depending on the event.
While there are no dealership-specific statistics on commercial losses due to weather, industry studies revealed that in 2022 there was an estimated $13.5 billion in commercial losses due to flooding alone.
What is Business Interruption Insurance?
It may seem obvious but for some dealers they may think other existing commercial insurance policies are enough to help in case the dealership cannot open or function. But there’s more to this coverage.
Business Interruption Insurance is there to help your dealership recover financially after any number of ‘disruptive’ events that could temporarily halt your operations. No sales, no service, no parts…nothing. You are truly ‘closed for business’.
This coverage can compensate you for the lost income while the dealership cannot open and help cover ongoing expenses that unfortunately continue whether your doors are open or closed.
Salaries, rent, benefits, vendor payments, etc don’t stop just because your lot flooded. This keeps everyone paid.
What Scenarios Will This Cover?
- Government Shutdowns or Regulations: Over 3 years ago, no one could have imagined a global pandemic shutting down virtually every customer-facing business but it did and dealers across the US were temporarily closed. Government authorities (Federal or state) may issue an order telling you to close and Business Interruption Insurance can help with lost income from these forced closures.
- Natural Disasters: As mentioned above, there are a handful of weather-related events that can force your lot to close operations (some used to call this Acts of God). Flooding, blizzard conditions, tornadoes, hurricane-force winds or storm surge, and in the last decade - wildfires. Western states have been hit the hardest and Business Interruption Insurance can cover any ongoing expenses like rent, utilities, employee salaries from closures or destruction of property that are entirely out of your control.
- Equipment Breakdown: It’s not just Mother Nature that can shut things down…you could lose the function of critical equipment like your computer system that handles all essential sales functions across all departments. Your lifts could break down in Service. The power could go out due to grid failure. You get the picture.
Business Interruption Insurance will cover expenses while you’re waiting for systems and equipment to be repaired or replaced. It’s good peace of mind as fixing major systems could take a day or could take 2 weeks.
- Fire or Structural Damage: It may seem like this falls under ‘Natural Disasters’ noted above but this is just different enough to warrant a separate mention. The weather could be absolutely perfect and then a fire breaks out in the dealership causing extensive damage to the showroom or other areas of the building. You can’t sell cars in a charred environment and you wouldn't want anyone working under those conditions.
Suppose you live in an earthquake zone (rare but it could happen). Again, the weather could be perfect but if there was structural damage to the building or its foundation, it’s unsafe to be open and operating. Business Interruption Insurance covers expenses while those important repairs are handled so that all employees and customers are safe being back in the building.
- Supplier Disruption: Imagine one of your main suppliers or vendors experiences their own catastrophic event that delays or cripples their production. If you’re unable to receive new vehicle or parts shipments for a period of time. Sounds familiar?
Another after-effect of the pandemic was severe (an understatement, really) supply chain issues and dealer lots were bare as a result. Parts for repairs were slow to trickle in and many shops simply could not fix enough cars as a result. This coverage can help in these rare but costly situations when you have nothing to sell and no parts to fix or maintain customer cars. Hopefully it will never happen again but if it did, this policy is meant to help.
If you’re considering this policy, be sure to look for exclusions and limits to the amount of time you are not in operation before the coverage kicks in. This can vary depending on the carrier and policy terms.
Be sure to remember that while there are plenty of coverages designed to replace or repair structures or inventory in case of events like those mentioned above, this policy will help pay the bills that occur as a result of the damage or event.