The Hidden Insurance Risk When You Sell Your Car Through a Dealer

If you’re planning to sell your car, letting your broker or insurer know might not be the first thing on your to-do list – but it’s an important step that can save you a lot of trouble later.

When your vehicle is placed with a dealer, third party, or showroom for sale, the way your insurance applies can change. Many policies only provide cover while the vehicle is in your possession or at your home address – not necessarily while it’s on a dealer’s floor or in someone else’s care.

Why This Matters

Some comprehensive insurance policies include specific wording such as:

“We agree to cover your vehicle against loss or damage while it’s parked in the showroom or on the floor of a recognised motor dealer, subject to certain conditions.”

These conditions often include:

• The vehicle must be at the dealership for the purpose of sale or servicing.
• The keys must be kept in a locked safe.
• The vehicle must be parked in secure premises during business hours and locked in a garage or showroom after hours.
• Any test drives must be accompanied by a dealership employee.

If your policy doesn’t include this clause, or if it hasn’t been endorsed to provide similar protection, you might not be covered if something happens while the vehicle is being sold — even if it’s with a trusted dealer.

Be Aware of Key Exclusions

Even when this kind of cover is in place, certain exclusions still apply. Most insurers exclude any:

Loss, damage, injury, liability or claim arising from any dishonest act, theft by false pretences, or fraudulent act or representation by a third party.

In simpler terms, if someone uses deception or fraud to obtain your vehicle – for example, taking it for a “test drive” and never returning – the loss may not be covered under your policy.

What You Should Do

If you’re in the process of selling your vehicle:

1. Let your broker or insurer know before handing it over to a dealer or third party.
2. Check your policy wording to see whether vehicles parked on a dealer’s floor are covered, and under what conditions.
3. Understand the exclusions, especially those related to theft by false pretences or fraud.

A quick chat with your broker can help ensure your vehicle stays protected – right up until the moment it’s sold.