This guide is for educational purposes only and reflects professional experience within California's dealer licensing process. It is not legal, financial, or insurance advice. Always consult a licensed insurance or financial professional for personalized guidance.
This page is made possible in partnership with Magic 98 Insurance — our preferred provider for dealer bonds and garage keepers liability coverage in California. Ask for Mike Gonzalez and mention Garrett from California Dealer Academy sent you for specialized dealer support and competitive rates.
Dealer bonds and insurance aren't just paperwork — they're legal requirements and core financial protections.
A dealer bond is a financial guarantee that you'll comply with state laws and ethical business practices. If a customer is harmed by fraudulent activity or violation of law, they can file a claim against your bond.
| Dealer Type | Bond Amount | Purpose |
|---|---|---|
| Retail & Wholesale Auto Dealers | $50,000 | Required for selling motor vehicles in California |
| Motorcycle Dealers | $10,000 | Required for dealers selling motorcycles & powersports |
| Auto Dismantlers | $50,000 | Required for vehicle recyclers and salvage operators |
| Wholesale-Only Dealers | $50,000 | Same requirement as retail due to state liability standards |
Although the bond amount is set by law, you only pay a fraction of that amount each year — called the premium.
Typical premium ranges:
Bond carriers evaluate your credit score, business experience, and financial stability when setting rates.
Pro Tip: When you apply for a bond, use the exact same legal business name that appears on your DMV application, lease, and signage.
Recommended Provider: Visit Magic 98 Insurance and ask for Mike Gonzalez. Mention Garrett from California Dealer Academy for dealer-specific rates and fast-track processing.
This is the foundation policy for every licensed dealer. It protects you if a customer, employee, or visitor is injured on your lot or during a test drive.
Typical coverage areas:
Recommended limits: $1 million per occurrence / $2 million aggregate.
Garage keepers liability is a separate coverage — often overlooked — that protects customers' vehicles in your care, custody, or control.
You need this if you:
Coverage applies to:
Many auctions and insurance partners require proof of garage keepers coverage before granting dealer access.
Dealer plate coverage extends liability to vehicles you drive for business use (test drives, transport, deliveries). Inventory coverage protects your owned vehicles against loss or damage on your lot.
Typical combined limit: Up to $250,000 inventory coverage, adjusted by lot size and vehicle value.
California requires workers' comp coverage for any employee on payroll, including lot attendants, salespeople, and mechanics.
| Coverage Type | Typical Limit | Required by DMV? | Purpose |
|---|---|---|---|
| Garage Liability | $1M / $2M | ✅ Yes | Protects from customer injuries or accidents |
| Garage Keepers Liability | $50K – $250K | ⚠️ Strongly Recommended | Protects customer vehicles in your care |
| Dealer Plate Coverage | Per vehicle basis | ✅ Yes | Covers test drives & demo units |
| Inventory Coverage | $100K + | ⚠️ Optional but wise | Protects owned vehicles on lot |
| Workers' Compensation | State minimum | ✅ If employees | Covers employee injuries |
Bond = Public Protection. Guarantees your financial responsibility to the state.
Insurance = Business Protection. Covers accidents, lawsuits, and property loss.
Together, they form the foundation of a DMV-compliant dealership. Without a valid bond and proof of liability coverage, your dealer application will not be approved or renewed.
| Step | Action | Typical Turnaround |
|---|---|---|
| 1 | Apply for bond with Magic 98 Insurance | Same day approval possible |
| 2 | Receive digital copy + original bond | 1–2 business days |
| 3 | Apply for garage liability coverage | 1–3 business days |
| 4 | Add dealer plate and inventory endorsements | Immediately after policy activation |
| 5 | Submit bond & insurance proof to DMV | Same week |
Magic 98 Insurance is a California-based provider specializing in auto dealer bonds, garage liability, and commercial insurance solutions. Led by Mike Gonzalez, Magic 98 Insurance offers fast approvals, competitive pricing, and deep knowledge of California's DMV licensing requirements.
📞 When you call or submit an inquiry, tell them Garrett from California Dealer Academy sent you — you'll get dealer-specific guidance and priority assistance.
Visit Magic 98 Insurance or email Mike directly through the contact form on their website.
You can't get licensed without the right bond and insurance — but with the right partner, it's simple and affordable.
Get dealership setup help with bonding Download the Dealer Bond Checklist Get dealership setup help
Ask for Mike Gonzalez and mention Garrett from California Dealer Academy sent you.