Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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auto auction need business insurance

In terms of risk due to business transactions an auto auction business has probably the same amount of exposure as any other business that deals with a large number of customers, with a need for some kind of insurance protection to close that gap. However, these types of legal issues due to customer complaints don’t happen frequently.

As a result, some will think paying for business insurance coverage just to run an auction is throwing good money down the drain. That said, problems with running a business of any type, including auction houses, don’t occur when things are going well. They happen when customers get upset and want their money back. Or worse, they have a lawyer come knocking for more than their money back.

Save yourself the hassle of finding the best rates on business insurance for your auto auction. Simply enter your zip code above to compare rates from all the top insurance companies in one place.

Potential Problems in Auctions

In the case of an auto auction business, it’s quite easy to get in trouble just with the description of the vehicle being auctioned off. A number of documents can trigger this risk, including the auction advertisement, the auction item description, and any detail provided during the auction itself whether verbal or written. The business can be held responsible by the winning bidder for providing false information if it turns out the car delivered doesn’t match what was described.

Additionally, the auction business can also be held responsible for over-promising the success of auction sale. A seller who doesn’t ultimately realize as much of a sale as expected could then turn around and sue the auction business for promising a much better result that wasn’t delivered. A perceived loss of sale profit could be claimed. This is because once the car goes up for auction the seller can’t pull it back, even if the bids are far lower than desired.

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Protection via Insurance

Business insurance helps a business operation continue regardless of financial hits associated with disputes or claims of false promises in products or service delivered. Even though the business may get sued from some of the problems described above, much like a car coverage policy the insurance company takes on the hit.

Instead of the business having to hire a lawyer, the insurance company decides to either legally fight the claim or pay it off with a settlement. The business in the meantime is free to continue operating without an unexpected loss. Thus the insurance premiums become well-spent money.

Unscrupulous Shakedowns

shakedown

Are auto auction businesses prime targets for legal shakedowns for money? Not really. They represent a business venture like any other, no more or less dangerous for the owner. However, where large amounts of money are involved for the purchase of something, a business involved can be easily held responsible for dissatisfaction. While most states limit recovery in a purchase to the amount of money spent, since it is contract in legal terms, fraud claims can result in triple damages if a party can make a case of intentional fraud.

In the meantime, a business could spend dozens of thousands of dollars to a lawyer just to answer all the pleadings. As a result, settlements become an easy way out to avoid bleeding financially further in a lawsuit, ergo the “shakedown” when the business receives a demand for a claim.

Costs to Avoid

Fending off a legal claim without business insurance can get expensive quickly, even for an auto auction business. Just to hire a lawyer to read and respond to the case will run $300/hr. Most lawyers will want the business to hire them on a retainer for a long-term case, which can run $1,000-$2,000/month. You will then likely have to respond to a legal complaint if the issue gets to court, which run anywhere from $75 to $200 per document and filing.

As you can see, just getting to the first steps case can already cost upwards of $10,000. But if the auto auction business had liability business insurance, the cost would continue to be the monthly premium and no more.

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Need Versus Being Smart

auto auction business insurance

So does an auto auction business need business insurance? Not necessarily, but it is a darn good idea if the business is going to be around for a while. The more customers you deal with in such a business, the more your risk increases that one of them will be upset and make a claim for a perceived recovery.

The issue for the auction business is statistical probability. How many customers will go by before one of them comes back upset with a lawyer? While 99% of the clients may never feel it’s worth the trouble, the one that does will cost the business thousands of dollars in legal expenses. A business insurance policy is annually far lower in cost and well worth the expense in terms of avoiding such a lawsuit.

Getting the Right Policy

Business insurance products should be compared to get the best value for a business’ dollar, and online quote systems make this easy to do. They can quickly get your auto auction business needs detailed and connected with multiple providers via the Internet. Subsequently, you can query responding agents to make your choice. Questions to always ask include:

– How are premiums charged and how much coverage does the plan provide in total?
– What type of risks won’t be covered?
– Is the insurance provider bonded and licensed in the state of the auction business?
– What has been the performance record of the insurer with past claims?
– How does a hostile claim get handled and what is the expectation of the business when things go legal?

With the responses received you can then compare the same from other potential plan providers as well. Add a bit of window shopping and selective sharing of your results, and a business can find a good policy to match its auction house risks closely. Enter your zip code below to compare rates across all the major insurance companies. Save time and find the best deal possible!