Buy Workers Comp Insurance for Your Auto Dealership—Here’s How to Get the Best Rate | WIMC

May 19, 2025

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Buy Workers Comp Insurance for Your Auto Dealership—Here’s How to Get the Best Rate

Operating an auto dealership involves managing a lot of moving parts. From handling vehicles to interacting with customers, dealing with the complexities of insurance is one aspect that can’t be overlooked. One critical form of insurance every auto dealership needs is workers' compensation insurance. In fact, in many states, it’s not just important but legally required to ensure that your employees are covered in the event of a workplace injury.

In this blog, we’ll explore everything you need to know about workers' compensation insurance for auto dealerships. We’ll discuss the significance of this coverage, the factors affecting the cost, and most importantly, how to get the best possible rate for your dealership. Whether you're new to the industry or looking to switch your current coverage, this guide is designed to help you navigate the process with ease.

What Is Workers' Compensation Insurance?

Workers’ compensation insurance is a form of coverage designed to provide financial protection for employees who suffer job-related injuries or illnesses. This coverage can pay for medical expenses, lost wages, rehabilitation costs, and even death benefits for the families of workers who pass away as a result of a workplace accident.

For auto dealerships, where employees regularly handle heavy machinery, work on vehicles, and interact with customers, having workers' compensation insurance is vital. The automotive industry, in particular, is considered high-risk due to the potential for accidents and injuries on the job. Whether it’s an employee getting injured while lifting a car part or a technician suffering from repetitive stress injuries, workers’ comp insurance helps ensure that your dealership remains protected financially.

Why Is Workers' Compensation Insurance Crucial for Auto Dealerships?

Running an auto dealership means you deal with a wide range of employees, including salespeople, service technicians, lot attendants, and administrative staff. Many of these workers perform physically demanding tasks, often involving heavy lifting, working with tools, and even operating machinery like car lifts. In these environments, the risk of injury is heightened, making workers' compensation essential.

Apart from ensuring your workers are covered in case of injury, workers' compensation insurance also offers protection for the dealership itself. Without it, the business could face financial burdens, lawsuits, or fines in the event of an employee injury. Workers' comp insurance not only shields your business from these risks but also helps establish a safer and more responsible workplace, which can improve employee morale and retention.

Moreover, for auto dealerships in states where workers' compensation insurance is mandatory, it is not just a choice but a legal requirement. Failing to comply with state laws could result in hefty fines or the suspension of your dealership’s operating license. Therefore, understanding how to properly secure this coverage and how to obtain it at the best possible rate is crucial.

How Is Workers' Compensation Insurance Cost Determined?

Like most types of insurance, the cost of workers' compensation is based on various factors. Some of these include:

Industry Classification: Workers’ compensation insurance premiums are heavily influenced by the industry in which you operate. Auto dealerships generally fall under a category with higher risk, meaning the rates may be higher than other industries that involve less physical labor. Employees who perform physically intensive tasks such as lifting, working with heavy machinery, and performing repairs are more likely to be injured, which impacts the premium.

Payroll Size and Structure: The more employees you have, the higher your premiums will likely be. This is because the more employees you have, the higher the likelihood of a claim being filed. The classification of your workers (e.g., service technicians, salespeople, or office staff) will also determine the premiums. For example, employees who are involved in physical labor (such as mechanics) generally have a higher risk profile than those working in less physically demanding roles (like administrative staff).

Claims History: If your dealership has a history of frequent or severe workers’ compensation claims, it could lead to higher premiums. Insurers evaluate the claims history of a business to determine its risk level. If there have been multiple injuries or claims in the past, insurance companies may charge a higher rate to offset the potential risk.

Location: The state in which your auto dealership operates can have a significant effect on your workers' comp insurance costs. Each state has different workers' compensation laws, and rates can vary based on the state's regulations, claims frequency, and industry standards. Some states may have lower rates, while others may impose stricter regulations or higher premiums.

Safety Programs and Practices: Businesses that have strong safety protocols and a proven track record of minimizing accidents are generally rewarded with lower premiums. If your dealership can demonstrate that you take proactive steps to reduce risk, such as regular training sessions, employee safety initiatives, and proper equipment maintenance, you may be able to secure a lower rate. Insurance companies may offer discounts or reduced rates for businesses with certified safety programs or certifications like ISO or OSHA compliance.

Experience Modification Rate (EMR): An EMR is a factor used by insurers to adjust the cost of workers' compensation premiums based on the employer’s past claims history. If your dealership has fewer claims and maintains a safe working environment, you will likely have a low EMR, resulting in lower premiums. On the other hand, a higher EMR could indicate a greater likelihood of future claims, leading to higher insurance rates.

How to Get the Best Rate for Workers' Compensation Insurance

Getting the best rate for your workers' compensation insurance is essential for keeping costs manageable while ensuring your dealership remains adequately protected. Here are some practical steps to help you secure the best rate for your business:

1. Shop Around and Compare Quotes

It’s always a good idea to compare workers' compensation insurance quotes from multiple providers. Insurance premiums can vary significantly depending on the provider, even for similar coverage. Some providers may offer additional services or discounts, so it’s worth reaching out to multiple carriers to get quotes and compare rates.

You can approach an independent insurance broker who specializes in commercial insurance for auto dealerships. A broker can help you navigate different insurance providers and policies, ensuring you get the best coverage at a competitive rate. Be sure to ask about any available discounts, such as those for businesses with a strong safety record or for bundling other types of insurance (e.g., general liability or property insurance) with workers' comp coverage.

2. Focus on Safety and Prevention

As mentioned earlier, a dealership that can demonstrate a commitment to employee safety is likely to see lower workers' compensation premiums. Investing in safety programs, providing ongoing training, and maintaining a safe work environment can have a substantial impact on reducing the frequency of injuries. Fewer claims mean less risk for the insurer, which often translates into a lower premium for your business.

One practical step is to implement a regular safety audit to identify hazards on the premises. These audits should be followed by corrective actions to eliminate or reduce the risk of accidents. Safety training for employees should be an ongoing process, especially for those who work in high-risk areas such as the service department.

3. Implement Effective Risk Management Practices

To further lower the cost of your workers’ comp insurance, you need to have a comprehensive risk management plan in place. A well-documented risk management plan not only minimizes the chance of workplace accidents but also demonstrates to insurance companies that you are committed to controlling your risks.

Make sure your risk management plan includes clearly defined safety policies, hazard identification, and a process for reporting accidents. Ensure that you maintain accurate records of any incidents and provide employees with the necessary resources to minimize risks in their work environment. A well-managed risk environment reduces the likelihood of claims and positions your dealership as a low-risk business for insurers.

4. Consider the Employee Classification Codes

When you purchase workers’ compensation insurance, the insurer will classify each of your employees into categories based on their roles and the risks associated with those roles. These classifications directly impact the premium you’ll pay. For example, employees who perform manual labor (like mechanics and technicians) will typically have a higher classification code and, therefore, a higher premium compared to administrative or sales staff.

While you cannot alter the risk associated with certain roles, you can optimize your employee classifications by ensuring that they are accurate and up to date. If an employee’s duties change over time, their classification should also change to reflect that. By keeping your classifications up to date, you’ll avoid overpaying for insurance due to incorrect classifications.

5. Negotiate with Your Insurance Provider

Once you’ve gathered several quotes and considered your options, don’t be afraid to negotiate with your insurance provider. Many insurers are willing to offer discounts or lower rates to businesses that have strong safety records or a low risk profile. If you’ve received competitive quotes from other providers, let your current provider know and see if they’re willing to match or beat those offers.

Additionally, discuss the possibility of reducing your deductible or increasing your coverage limits. Sometimes, adjusting these factors can result in a more favorable premium structure without sacrificing essential coverage.

6. Review and Update Your Policy Regularly

Once you’ve secured a workers’ compensation policy, it’s important to review it regularly. As your business grows and evolves, your insurance needs may change. For example, if you hire more employees or expand into new service areas, your coverage might need to be adjusted to reflect the new risks.

At least once a year, review your workers’ comp policy with your insurance agent to ensure it still meets your needs and that you're not overpaying for unnecessary coverage. You may also be able to take advantage of new discounts or programs that can help reduce your premiums.

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