Cannot Find a Policy. Considering Self-insuring

Jan 23, 2016

  1. artmt
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    artmt New Member

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    I am starting a small auto wholesale business - selling used cars to other dealers. My licence and my dealer plates are from WA but I am doing business out of my home in MA. No lot, no garage.
    WA does not require insurance on dealer plates but because I am a MA resident I must comply with general MA auto liability requirements.

    All I need is auto liability for the dealer plates but I am having hard time finding a policy in either MA or WA. The agents I spoke with offered auto liability as an option for the garage policy, and insurance companies seem to be confused by the fact that I don't have a garage. The cross-state situation seems to be another confusing factor.
    I am also now considering the self-insurance option via a bond or a cash deposit.

    Any advise on finding a policy or a self-insurance bond will be much appreciated.
     
    artmt, Jan 23, 2016
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  2. Josh
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    Josh Retired Agent, Current List Broker

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    Do the math on what happens if you hit someone and they go after you for $300k because you were in an accident then factor in the cost of the attorney; I can't for the life of me imagine why anyone would want to self-insure. Whatever you do, get something.
     
    Josh, Jan 23, 2016
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  3. artmt
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    artmt New Member

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    Josh,

    Thank you for your input.
    I agree. What would you recommend instead?
     
    artmt, Jan 23, 2016
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  4. indienoise
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    indienoise Guru

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    This kind of begs the question, why is your business licenses in WA if you are in MA?

    If all you need is liability required for dealer plates and aren't wanting physical damage coverage on your vehicles, the premiums aren't normally THAT much. But you really ought to be licensed and plates issued in the state you're doing business in. Not like it's a situation of being near the border of a neighboring state, either.

    As far as the garage liability, that's kind of the standard for any dealer, wholesale or retail, and you're storing unsold vehicles SOMEWHERE, even if it is your home.
     
  5. artmt
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    artmt New Member

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    WA is an easier state to get licensed. And being interstate business by its nature, auto wholesale licenses from any state are valid across the country.
    Why do you say that? I don't think it is unusual for the state of registration and the state of operations to be unrelated. Consider car rental companies or delivery companies.
     
    artmt, Jan 24, 2016
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  6. indienoise
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    indienoise Guru

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    There's a big difference between a large corporation in all 50 states that has to choose a state of domicile vs a small operation licensed in a state 2500 miles away.

    Mostly I found it interesting that the first, and one of the only, details you mentioned is that WA doesn't require insurance or dealers. Simply curious if that was a motivation for doing it this way.

    I can understand agents or insurers being hesitant to insure this risk since there is a disconnect here. Maybe not an issue of you don't need physical damage coverage though.
     
    Last edited: Jan 25, 2016
  7. artmt
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    artmt New Member

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    What is that difference and how does it affect risk?
    With that as the motivation I wouldn't be shopping for insurance. It is however representative of the general motivation. WA has fewer and easier requirements than most states. One of the few where small startups are not yet regulated out.
    After some more research, that no longer seems to be the main issue (although it still may be relevant). While liability only for dealer plates seems to be available across the country, in MA it seems you can only get it along with insuring $1M+ of inventory.
    I wouldn't be surprised if this insuance has been outlawed in MA. Dealer lobby is strong here.

    Any advice?
     
    artmt, Jan 26, 2016
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  8. indienoise
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    indienoise Guru

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    It's hard to fight the lobbies, especially the auto dealers. Just look at Tesla when they tried to open up retail shops not long ago.
    I'm nowhere near MA, so it's probably best to consult with someone local who is more familiar with laws there.

    As far as how your location affects risk, like I said, it's mainly only going to be an issue if you were trying to cover physical damage to your vehicles, with liability only it's a little more wide open. But insurers like risks to be somewhat predictable, and as an agent evaluating that risk, being licensed in a state far, far away just is a little odd if you're not actually doing business there or even anywhere in the region. Underwriters can get hung up on the little things sometimes. But, I understand the challenges if local ordinances seem to be trying to keep smaller fish out of the pond.
     
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