Before NextGear Capital, AFC, Dealertrack, or Ally Financial will approve your floorplan line of credit, they require proof of specific insurance coverages — and they must be listed as loss payee on your dealers open lot policy. Understanding these requirements in advance prevents delays in getting your credit line approved and keeps you in good standing with your lender.
What Is Floorplan Financing?
Floorplan financing (also called a floorplan line of credit or inventory financing) is a revolving line of credit that allows licensed auto dealers to purchase vehicle inventory. Instead of paying cash for each vehicle at auction, the dealer borrows against the floorplan line, then repays the lender when the vehicle is sold.
Major floorplan lenders include NextGear Capital, Automotive Finance Corporation (AFC), Dealertrack Floorplan (Cox Automotive), Ally Financial, and Kinetic Advantage. Each lender has its own underwriting requirements, but all of them share one common requirement: the dealer must carry adequate insurance on the floorplanned inventory.
Why Floorplan Lenders Require Insurance
When a lender finances your inventory, the vehicles serve as collateral for the loan. If a vehicle is stolen, damaged by a hailstorm, or destroyed in a fire before it sells, the lender's collateral is gone. Insurance protects the lender's interest in the vehicle — which is why they require it as a condition of the credit line and why they must be listed as a loss payee on your policy.
A loss payee designation means that if you file a claim for a covered loss on a floorplanned vehicle, the insurance company pays the lender first (up to the amount owed), then pays any remaining proceeds to you. This protects the lender's collateral position.
What Insurance Coverage Floorplan Lenders Require
While specific requirements vary by lender, the following coverages are typically required by all major floorplan companies:
1. Dealers Open Lot Insurance (Required by All Lenders)
Dealers Open Lot (also called Dealers Physical Damage or Inventory Insurance) covers your vehicle inventory against physical damage from theft, vandalism, hail, wind, flood, and fire. This is the primary coverage that protects the lender's collateral. All floorplan lenders require dealers open lot coverage, and they must be listed as loss payee on the policy. The coverage limit must typically equal or exceed the total outstanding balance on the floorplan line.
2. Garage Liability Insurance (Required for Dealer Licensing)
Garage Liability Insurance covers bodily injury and property damage arising from your dealership operations — including test drives, lot operations, and customer interactions. Most lenders require proof of garage liability as part of their dealer approval process because it demonstrates that you are a properly licensed, insured business. State minimum requirements vary: Florida requires $25,000 CSL, Texas requires $85,000, and Georgia requires $125,000 CSL.
3. Garagekeepers Insurance (Situational)
If your dealership also performs service work or holds customer vehicles overnight, Garagekeepers Insurance covers damage to customer vehicles in your care, custody, or control. Some lenders may require this if your operation includes a service department.
Lender-Specific Requirements
| Lender | Dealers Open Lot Required? | Garage Liability Required? | Loss Payee Required? |
|---|---|---|---|
| NextGear Capital | Yes | Yes | Yes |
| AFC (Automotive Finance Corp) | Yes | Yes | Yes |
| Dealertrack Floorplan | Yes | Yes | Yes |
| Ally Financial | Yes (comprehensive) | Yes | Yes |
| Kinetic Advantage | Yes | Yes | Yes |
How to Get a Certificate of Insurance for Your Floorplan Lender
Once you have a dealers open lot policy in place, your insurance agent can issue a Certificate of Insurance (ACORD 25) naming your floorplan lender as loss payee. The certificate should include your name and dealership address as the insured, the lender's full legal name and address as loss payee, the policy number, effective dates, coverage limits, and the insurer's name and AM Best rating. Most lenders also require 30 days' notice of cancellation — meaning if your policy is cancelled, your insurer must notify the lender 30 days in advance.
What Happens If Your Coverage Lapses?
A lapse in insurance coverage is a serious issue for floorplan dealers. Under most floorplan agreements, a coverage lapse constitutes a default, which can allow the lender to demand immediate repayment of the outstanding balance, suspend your ability to draw additional funds, or purchase force-placed insurance on your inventory and charge the premium to your account. Force-placed insurance is significantly more expensive than a standard dealers open lot policy. Maintaining continuous coverage is far less costly than dealing with a forced placement.
Bundling Your Floorplan Insurance Package
Many dealers find it convenient to bundle their garage liability, dealers open lot, and garagekeepers coverage with a single carrier. Bundling simplifies certificate management, reduces the risk of coverage gaps, and may result in better pricing on the overall package. As an independent agency working with 15+ A-rated carriers, we can help you build an insurance package that meets your floorplan lender's requirements, satisfies your state's dealer licensing minimums, and fits your budget. We issue certificates of insurance quickly — often same-day.
Disclaimer: Insurance requirements described in this article are based on publicly available information from floorplan lenders as of 2026 and are provided for general informational purposes only. Lender requirements are subject to change. Always verify current insurance requirements directly with your floorplan lender before entering into a financing agreement. This article does not constitute legal or financial advice.