Kelly’s Korner – Physical Damage Insurance
Q The customer has traded in an older vehicle, which only has liability insurance on it. It was a late deal. No time to verify full coverage. What are my options?
A It is the responsibility of the F&I manager to verify full coverage on every sold vehicle. The general rule for insurance policies is: The exact coverage on the trade vehicle is the same coverage automatically transferred to the new vehicle for 30 days. The coverage is not automatically upgraded from liability; only to comp collision, fire, and theft along with liability. The coverage is transferred only if a vehicle is traded in. Additional vehicles are not automatically covered. If an agent extends coverage, they do so as a courtesy for their client. The dealership has the duty to verify insurance coverage before delivery of the unit.
Let’s say the deal is late. The insurance agent cannot be reached. The insurance card indicates liability coverage only. If the vehicle rolls and is involved in an accident the dealership will be at risk. If the accident caused a death, the big gun attorneys will be called in, and the law of deep pockets will prevail.
If the customer pays in cash in the form of a personal check or cashier’s check, remember that the customer can place a “stop payment” on the check. If the vehicle has been crashed and the check has not cleared, there is no coverage, which presents a huge problem.
When someone pays cash, look for legal currency. The rest are negotiable instruments, and are considered an interest-free loan. It is imperative to verify insurance coverage.
“Kelly’s Korner” Column, Oregon IADA Squeaky Wheel Newsletter, May 2006