If you’ve been in the buy-here, pay-here (BHPH) business long enough, verifying customers’ proof of insurance for a third-party lender (or yourself) is second-nature.
Some dealers new to the BHPH industry don’t realize that it’s up to them to monitor whether their customer has an active policy while there is a lien on the vehicle. A BHPH dealer verifying proof of insurance is potentially preventing you thousands of dollars in unforeseen expenses.
“Keeping collateral insured is a major part of avoiding major losses,” lawyer Michael W. Dunagan wrote in November’s issue of Texas Dealer Magazine.
If you’re new the BHPH, you’ll want to list your business as the lienholder for the vehicle on their insurance policy. You’ll also want to check with your customer’s agent monthly to ensure their policy is active.
Some dealers also list themselves as a loss payee on their customers’ policies. This will give you claim to the damages paid out if the vehicle is in an accident.
In some states, it’s safe to reject policies with one named insured or excluded drivers. Policies with named insureds or excluded drivers are not as broad when covering an accident.
Some companies provide services for dealers and lienholders to save them time when verifying proof of insurance.