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Re-Insurance 101


The Basics Of Re-Insurance

In essence, We assist the dealer to create your own insurance company in the form of a C-corporation, and we also assume the responsibility for managing and maintaining enough money in your reinsurance account to cover the costs of claims or cancellations. In addition, unlike other types of insurance your customers buy from carriers, reinsurance transfers the risk related to warranty claims directly to your own reinsurance company.

Automobile dealer reinsurance is a specialized financial product that helps auto dealers fulfill their warranty obligations for vehicle service and powertrain contracts, GAP insurance, tire and wheel protection, and several other finance & insurance (F&I) products. In addition, it allows the dealers to gain greater control over the financial aspects of their business.

A key benefit of a dealer’s reinsurance company is to hold required reserves in excess of claims and cancellations in a tax-advantaged manner. Establishing a reinsurance company also allows the dealer to keep a greater share of the profits generated from the F&I products that they sell. In addition, when a dealer has his or her own reinsurance company, the funds can be used to enable a number of financial transactions, such as the acquisition of new dealerships, investment in real estate, or as a factor in their own wealth planning.