Insurance Verification
4 mins
 min read

Know Before They Go: Why Car Dealerships Should Verify Insurance Before Every Test Drive

Published on
June 12, 2024
Contributors
Elizabeth Reed

Content Marketing Manager

TL;DR:

  • Car dealerships should verify insurance before every test drive to protect against financial risk and legal issues.
  • Some dealerships may skip this step due to time constraints or trust in customers.
  • Services like Canopy Connect offer a quick and secure way to verify insurance in less than 30 seconds.
  • Verifying insurance ensures customers are covered in case of an accident and fosters a transparent buying experience.
  • Prioritizing insurance verification is a win-win for both dealerships and customers.

The thrill of a test drive is a cornerstone of the car-buying experience. It's the buyer's chance to get behind the wheel, feel the car's power, and see if it fits their lifestyle. But what happens if they take that shiny new SUV for a spin and, unfortunately, have an accident? This is where things can get messy, especially when it comes to insurance coverage.

Many car dealerships operate under a kind of unwritten insurance code. You've probably heard it before: "If a salesperson is in the car, it's covered by the dealer's insurance, but if a test driver goes solo, their insurance covers it." This isn't entirely inaccurate, but it's a simplification that can lead to headaches down the road.

Be aware that while auto dealership insurance typically covers most on-site accidents, subrogation could shift responsibility to the customer's insurance. This can create extra work for the dealership, as they'd then need to manage the claim process with a customer's insurer for repairs.

Here's a peek behind the curtain at why some dealerships might not be as diligent about verifying insurance before every test drive:

  • Streamlining the Process: Salespeople often juggle multiple customers, and adding an extra step like insurance verification can feel time-consuming. The pressure to close deals can lead to shortcuts, with proof of insurance (a piece of paper!) sometimes being accepted at face value.
  • Trust (Maybe a Little Too Much): Ideally, customers wouldn't take a car for a spin without valid insurance. But let's be honest, mistakes happen. Some dealerships might operate on a "benefit of the doubt" approach, assuming customers wouldn't risk a test drive without coverage.
  • The Borrowed Vehicle Agreement: This document, often used for loaner vehicles during repairs, can sometimes be mistakenly seen as a catch-all for test drives. While it outlines responsibilities, it doesn't necessarily verify active insurance.
  • Paperwork Pile-Up: Verifying insurance traditionally involves phone calls or a scavenger hunt to find proof of insurance that outlines coverages. It's no surprise that some dealerships might avoid this extra step, especially when faced with a busy sales floor.

Now, let's address the elephant in the room: Why should dealerships prioritize insurance verification for every test drive?

The answer is simple: protection. An accident during a test drive can be a major headache for everyone involved. Here's what's at stake:

  • Customer Liability: Imagine a customer takes a car for a spin without insurance and gets into an accident. They could be on the hook for significant repair costs, not to mention potential injuries. This can turn a dream car purchase into a financial nightmare.
  • Dealership Risk: If a customer with lapsed insurance damages a vehicle during a test drive, the dealership becomes financially responsible. This can put a serious dent in profits and create a logistical nightmare.
  • Legal Issues: Depending on state laws and the specific circumstances of the accident, dealerships could face legal repercussions for allowing an uninsured driver to take a vehicle out.

The Good News: Faster Insurance Verification For Car Dealerships is Here

Thankfully, the days of time-consuming phone calls and paperwork piles are fading. Services like Canopy Connect offer a secure and speedy way for dealerships to verify insurance in less than 30 seconds. This removes the burden on salespeople while providing peace of mind.

Instant Insurance Verification for Car Dealerships: A Win-Win for Everyone

Verifying insurance before every test drive is a win-win for dealerships and customers alike. It protects dealerships from financial risk, ensures customers are covered in case of an accident, and fosters a more transparent buying experience. With solutions like Canopy Connect, there's no excuse to skip this important step. A quick insurance verification can save everyone a lot of trouble down the road.

See more about our solution here.