Dealership owners know that potential customers will put demo vehicles through the wringer to ensure they get the best value for their money. Demo car insurance can protect them from liabilities and help them recover damages. So, what should you consider while considering insurance for these test cars?

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What Is a Dealer Demo Car?

As is apparent from the name, a dealer demo car is a car that customers can take for a test drive, but a dealership's employees can also use it as a mode of transportation. Additionally, dealerships can also use them to promote their business by allowing potential customers to test drive them.

However, while demo cars come with several benefits, they also require insurance, which comes with its own set of obstacles and considerations.

Insurance Coverage Essentials for Demonstration Cars

Here are some of the essential insurance coverage essentials that all demo vehicles should have:

Liability Insurance

Without liability insurance, you will need to pay out of pocket for property damage and injuries from accidents, which will be quite expensive. It will kick in if the demonstration car is in an accident during a test drive. Liability coverage makes sense from a financial point of view and is also a legal requirement.

Some of the best features include the following:

Coverage for Bodily Injuries

These cover the costs of injuries that other people may sustain after getting into an accident with your demonstration car. The coverage covers medical costs, physical rehabilitation, and lost wages in some cases.

Property Damage Coverage

If your demonstration car causes an accident that leads to property damage, this insurance coverage will kick in to cover the costs. Some of the covered damages can include damaged fences, buildings, etc.

Liability insurance can protect your dealership against a lawsuit and ensure all claims are addressed timely. It can cover expensive legal charges, court expenses, and settlements from third-party claims.

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Broad Coverage

Besides accidents, demo cars can also be vandalized, stolen, or sustained damages from natural disasters such as storms or floods. Since these incidents are unpredictable and often highly damaging, comprehensive coverage that covers repair and recovery costs can give you peace of mind.

Collision Coverage

Whether potential customers are novice or experienced drivers, they can be involved in a collision as they put your demo car through its paces. The chances of a collision are high in this case, but you can cover those costs and save money with collision coverage. Whether the vehicle is involved in a fender bender or serious collision, the coverage will mitigate the financial impact of repairs and replacement.

Some of the key features of this coverage include:

Physical Damage Coverage

Collision insurance covers your dealership if the demo vehicle collides with other objects such as a fence, pole, etc.

Replacement or Repairs

The policy will cover repairs to the vehicle or pay for a replacement if it is unsalvageable. The latter will be the case if the repair costs exceed the car's cash value. In that case, the collision coverage will cover the vehicle's depreciated value or the entire replacement cost.

Coverage for Uninsured and Underinsured Coverage

If the driver who asks to take your demo car for a test run doesn't have sufficient insurance coverage or none at all, this insurance can protect you from financial losses. It will kick in and cover the financial burden of repairs and medical costs if an uninsured or underinsured driver is involved in an accident during a test drive.

Some of the best features of this type of coverage include the following:

If you need to pursue legal action against an uninsured or underinsured driver your demo car was involved in an accident with, legal protection can help you recover damages.

Hit-and-Run Incidents

If the at-fault driver of a hit-and-run incident involving your demo car cannot be identified or is uninsured, this coverage can cover damages.


You can choose the type of underinsured and uninsured coverage you need as per your needs or risk tolerance. The limits will determine the maximum amount your policy will pay after an accident involving such drivers.

Rental Reimbursement Insurance

This type of insurance for demo vehicles is specifically meant for dealerships. It covers the cost of renting the car when it is unavailable. For example, you may need to provide another demonstration car if your original one is being repaired. Rental reimbursement insurance kicks in during this time to offset the expenses of renting a temporary replacement vehicle. In other words, it ensures that a dealership always has a demo vehicle on hand and can offer services without a break.

Some of the best features of this type of coverage include:

Cost Coverage

This coverage determines the maximum overall and daily reimbursement limits for the demo vehicle and is set during negotiations.

Coverage Duration

The coverage duration covers the time it takes for a demonstration car to be repaired and ends when it is repaired.

Eligibility Criteria

Your insurance policy for the demonstration car may have certain conditions. For example, it must be inoperable because of a covered incident (such as a collision), and the repairs required must be in line with policy terms.

As you work to ensure your customers get the best cars their money can buy and refer you to others, the last thing you need is to worry about insurance. Use the tips in this guide to get the best coverage for demo vehicles and protect yourself from legal and financial liabilities.

Get the Best Demo Vehicle Insurance Coverage from BindRight

Whether you own a dealership or want the best insurance coverage for your demo vehicles, getting the best coverage plan can help you mitigate emergency costs. In many cases, it can also prevent your business from going belly-up. For the best insurance coverage for your demo vehicles, contact BindRight. Connect with experienced auto insurance agents who can help you customize an insurance plan with the needed coverage. Ensure your business has the legal and financial protection to thrive and grow.

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