Garage liability insurance refers to insurance coverage needed for auto repair shops, auto dealerships, tow truck drivers and service stations. The primary coverage type is general liability insurance, which covers third-party bodily injury and damage or theft of machinery or vehicles on your premises. The annual cost of garage liability insurance averages $300 to $1,000 annually.
How Garage Liability Insurance Works
Auto repair shop insurance helps protect small business owners working in the garage and auto repair industry, and it actually refers to two different things; the first is all of the different types of insurance that auto repair shops and garages need to protect your business fully. This can include general liability, garagekeepers insurance, workers’ compensation and more.
Sometimes, however, garage liability insurance is just referring to general liability insurance for garages. General liability insurance, which primarily protects against claims arising from third-party bodily injury or property damage. It’s the most common type of insurance garage owners need, regardless of how big your business is.
Auto shop owners can combine general liability, property insurance, and sometimes other coverage types into one bundled package called a business owners policy BOP. A BOP allows you to pay one insurance provider and one monthly payment for all of your coverages through that provider. This is also typically a way to save money as opposed to buying each individual coverage separately.
Common Types of Garage Liability Insurance
|General Liability Insurance||Third-party claims for bodily injury, property damage, medical payments and personal and advertising injury|
|Garagekeepers Insurance||Covers your customer’s vehicle if it is damaged while left in your care when you're not working on it (i.e. if someone breaks in overnight and damages or steals the vehicle)|
|Workers' Compensation||Work-related injuries, medical bills, wage replacement and more for your employees; required in most states|
|Commercial Vehicle Insurance||Covers employees for bodily injury and property damage done to third parties while operating commercial vehicles.|
|Business Interruption Insurance||Loss of income when a covered claim causes suspension of business operations.|
|Commercial Umbrella Insurance||Extended coverage on other insurance types|
Garage Liability Insurance Costs
The annual auto repair shop insurance cost typically falls between $300 and $1,000, just for the general liability coverage. However, when your business includes all relevant coverage types that you may need, such as garagekeepers insurance, commercial vehicle insurance and workers’ compensation, the total annual cost for small business owners ranges from $2,000 to $3,000 in premium.
Auto Repair Shop Insurance Costs at a Glance
|General Liability Insurance|
|Commercial Vehicle Insurance|
|Business Interruption Insurance|
|Commercial Umbrella Insurance|
As you can see, the average cost for garage liability ranges from $2,000 to $3,000 for a full range of coverage. Most garage businesses will need general liability insurance and garagekeepers insurance. Many businesses will also need commercial vehicle insurance and workers’ compensation, which is required in most states if you have employees.
Garage Liability Insurance Providers
When you are ready to start shopping for garage liability insurance and other coverage types you may need, the two primary sources to find the right policy for you are insurance agents and brokers. Insurance agents represent one insurance company and can offer quotes and coverage from their insurance products. Brokers typically represent several different insurers and can do the coverage and cost comparison for you.
Based on our research here are five quality insurance providers that offer garage liability insurance:
The Hartford is a large insurance company that specializes in insurance for small business owners, including businesses in the auto repair industry. It offers primary coverage garage liability insurance coverage, such as general liability, commercial property insurance and business interruption insurance. You can also combine these coverages into a BOP.
Progressive Commercial’s Progressive Advantage Business Program can tailor insurance coverage to fit needs of almost any garage business, including packages for tow truck businesses, body shops, auto repair shops, muffler shops, radiator services and more. Progressive offers competitive rates, flexible payment plans and 24/7 customer service.
Working with a large, national insurance company like Nationwide can be a good fit for small business owners because the insurer can offer a wide variety of products at competitive prices. Nationwide’s garage liability insurance offerings include several coverage types like garagekeepers insurance, commercial auto, workers’ compensation, equipment breakdown coverage and more.
Trusted Choice is an insurance company that prides itself on being independent and simple, which can be attractive qualities for small business owners on the go. Rather than searching for agents, you can use Trusted Choice to find the right insurance agent for you with the proper garage liability insurance package that you need.
Farmers Insurance is a large United-States-based insurance company, and it is one of the top insurers that serves small and medium-sized businesses. For garage liability coverage, it offers all of the required types, such as general liability, garagekeepers insurance and workers’ compensation, as well as other types that may be recommended like commercial vehicle insurance.
Tips on Applying for Garage Liability Insurance
There are many different types of businesses associated with auto repair like muffler shops or tire shops, which means that the respective insurance needs for will vary as well. You may only need commercial general liability insurance but it’s likely a garagekeepers policy and workers’ compensation will also be needed. To help determine the best coverage for you, there are a few key pointers to remember.
Here are four of the most important things to remember when applying for garage liability insurance:
1. Get the Right Garage Insurance Coverage
Most businesses will need multiple types of garage insurance in order to be fully covered, but what you need will depend on the nature of your work and the size of your business. In fact, you may need multiple types of insurance for a single accident in order to escape without a huge financial burden to your business. It’s important to get the right coverages to have a peace of mind about your day-to-day operations.
According to Kevin O’Connor, President, Dealers Insurance Services:
“To understand the difference between garage liability and garagekeepers insurance, consider the following example: A customer brings in their vehicle for repair. Your mechanic takes the vehicle for a test drive and, in the process, hits another vehicle. In the accident, your mechanic totals the third party’s vehicle and injures its driver. Your mechanic also totaled your customer’s car that he was test driving. The third party’s bodily injuries and their vehicle are covered by the garage liability policy. The damage to your customer’s vehicle is covered by garagekeepers insurance.”
2. Know Your Risk Exposures
When buying insurance, you are buying protection from risks. In the garage business, some of the biggest risks that need to be covered include bodily injury and property damage to third parties. However, you also need coverage for the theft of or damage to your tools and machinery or damage to your customers’ vehicles while under your care. The greater your exposure to these risks, the more coverage you’ll need.
3. Use an Agent or Broker Who Knows the Garage Business
Garage liability insurance is industry-specific, which means it’s a specialty type that is unique to a certain kind of business owner. When shopping for an insurance policy, be sure to seek an agent or broker who understands the garage and auto repair shop industry. A knowledgeable insurance agent or broker will help you determine the best coverage types for your shop.
4. Gather the Necessary Information
The more information you provide in the application process, the more you will help the insurance agent, broker or underwriter understand how to protect your business against risk exposures.
Here are the documents and information to have ready before shopping for garage liability insurance and related coverage types:
- Business contact information
- Number of employees
- Number and value of vehicles used for the business
- If you keep your customers’ vehicles in your care
- Number of years you’ve personally worked in the industry
- Number of years your business has been in the industry
- Details of any other insurance you currently have
- Claims history from at least the past three years
- Insurance requirements like licensing or requirements for certificates
Providing accurate and complete information will not only protect from more than work-related risk but it may also prevent you from being denied coverage for a false statement on the application.
Required Auto Repair Shop Insurance
Depending on the nature of the garage business, the insurance types required will be general liability insurance and garagekeepers insurance. Some businesses will require both coverage types, as well as workers’ compensation. If a small business owner needs liability coverage, commercial property insurance, and business interruption insurance, most providers will bundle these coverages into one package as part of a BOP.
1. General Liability Insurance
If you are buying the basic garage liability insurance coverage type, it will be a commercial general liability insurance policy, which covers third-party bodily injury, property damage, medical bills and related expenses. This coverage is important for garage business owners because your greatest risk exposure is claims from injuries and property damage to your customers.
For example, if a customer slips and falls at your shop, garage liability insurance will cover medical bills and legal fees if the customer sues. Also, if you damage a customer’s vehicle while it is in your shop, garage liability covers this as well. Every garage business owner should have this basic form of garage liability insurance.
2. Garagekeepers Insurance
Garagekeepers insurance covers your customer’s vehicle if it is damaged while left in your care or at your shop overnight. This coverage is not the same as general liability, which covers bodily injury and property damage resulting from your work or negligence. Garagekeepers insurance will cover damage not caused by you, such as fire, theft and weather.
For example, let’s say your customer leaves her vehicle at your shop overnight for repair. When you return to the garage in the morning, you discover that someone has vandalized the vehicle. Garagekeepers insurance will cover the cost of repairs. If you keep your customers’ vehicles in your care, you’ll need this insurance coverage.
3. Workers’ Compensation
Workers’ compensation pays for your employees’ work-related injuries, medical bills, loss of income and more. It’s important to note that if an employee receives workers’ comp wages while he or she is injured or ill from something that happened while on the job, he or she cannot later sue you for the incident or for negligence. The cost of coverage depends upon risk exposures and the number of employees working for you.
Workers’ comp is required in most states for business owners that have one or more employees. Therefore, since most garage and auto shop owners have at least one employee, workers’ comp is a common coverage type that garage businesses need.
Recommended Garage Liability Insurance Types
Garage businesses, such as auto repair shops, auto dealerships, tow truck drivers and service stations, often need more insurance types than the basic garage liability insurance or garagekeepers insurance. Therefore, insurance agents and brokers often recommend other coverage types to protect against additional risk exposures.
Here are three recommended insurance types that garage business owners may need in addition to the required coverage types:
1. Commercial Vehicle Insurance for Tow Trucks
If your business owns a vehicle, such as a tow truck, and it is involved in an accident, commercial vehicle insurance will cover you and employees for bodily injury and property damage done to third parties. This insurance can also cover damage to your vehicle caused by an uninsured driver. Keep in mind that this insurance covers your vehicles, not your customers’ vehicles.
For example, if your tow truck or other service vehicle is being used to transport other vehicles, people or to meet with customers, you need commercial vehicle insurance. You will also need this coverage if you have employees that use your vehicle to complete services for your business.
2. Business Interruption Insurance
Business interruption insurance covers a loss of income if your shop suffers damage due to a covered event and is forced to temporarily close down. Insurance companies will typically limit the duration of this coverage to less than one year.
For example, if a fire did extensive damage to your shop, causing you to close for business for several days, the lost revenue can be recovered by business interruption insurance. Garage business owners that work in a location or environment that is at risk of fire or extreme weather may consider getting this coverage.
3. Commercial Umbrella Insurance
Commercial umbrella insurance extends the limits of coverage on other lines of insurance. Most small businesses do not need umbrella insurance, but those that have high liability risk like auto dealers may need to consider extending their liability limits with this coverage.
Remember that a garage liability insurance policy begins with a basic package that only covers third-party liability for bodily injury and property damage due to business-related activities. Most insurance carriers offer packages that include other coverage types, such as business interruption. However, there are usually more coverage types, such as workers’ compensation, that you’ll need to add.
Who Needs Garage Liability Insurance
Every garage-related business will need at least the minimum garage liability coverage, which covers third-party bodily injury and property damage. Many will also need garagekeepers insurance, which covers your customers’ vehicles while under your care, such as overnight storage. There are several business types that typically have both types of coverage and more added to the policy.
Here are garage businesses that typically have both garage liability insurance and garagekeepers insurance, according to TrustedChoice:
- Auto repair shops
- Service stations
- Tow truck operators
- Auto body shops
- Detailing operations
- Auto glass installers
- Oil change and lube shops
- Vehicle painting and pinstriping operations
- Sound repair and installation shops
- Emissions testing sites
- Vehicle interior restoration shops
According to Jesse Yuvali, Owner, Jesse’s Garage European Auto Repair:
“Every auto repair professional needs to make sure the garage and the shop’s customers are covered in case of any accidents that can cause bodily injury to the customers or damage to their vehicles. Coverage should include risks like theft or property damage related to a part or a technician.”
Some examples of your risks include:
- Test-driving a customer’s car and the technician gets rear-ended or some other type of auto accident, no matter who is responsible.
- A customer’s vehicle gets stolen or broken into when left overnight for early morning service. Another example is if the vehicle is left outside where it can be exposed to wind and storms that can cause scratches or broken windows, thus soaking the interior of the car.
- A customer trips and falls in the parking lot.
- Weather or fire-related damages to your inventory, customer vehicles, tools and technical equipment.
- Vandalism, which seems to strike local businesses often.
Yuvali also advises that garage owners discourage customers from entering through the back of the garage. This can help prevent customers from coming into contact with any dangerous tools or tripping and falling.
The Bottom Line
Small business insurance may be one of the most important investments you’ll ever make. Proving certain garage insurance coverage can also be required with getting an auto shop loan from a small business lender. The standard garage liability insurance policy, which covers third-party bodily injury and property damage, is the first coverage to buy. However, coverage may also include other coverage types, such as garagekeepers insurance, workers’ compensation and commercial vehicle insurance.