What Is Garage Liability Insurance & Do You Need It?
Liability insurance is crucial to protecting your small business from lawsuits and accidents, but not all liability insurance policies are the same. If you run an auto repair shop, auto dealership, gas station, or tow service, you might be in need of a specific type liability insurance plan that helps insure and financially protect vehicles kept and stored on your site: garage liability insurance.
So what is garage liability insurance and do you need it? And, the big question, how much is it going to cost you? Keep on reading to find out.
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What Is Garage Liability Insurance?
Garage liability, also called repair shop insurance, is a combination of a general liability insurance plan and a commercial auto policy. 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. A good garage liability insurance policy with ample coverage will include general liability, commercial auto for garage businesses, and garage keeper’s legal liability. The goal of garage liability is to provide peace of mind and protection for the vehicles in your care. Vehicles may include cars, trucks, bikes and many other kinds of equipment and machinery that are stored on-site.
Your policy coverage will depend on what kind of business you run. If you are simply storing vehicles on-site, your policy will be different from someone who is actively repairing vehicles on-site. Check with an insurance expert to determine the amount of coverage your business needs to be adequately protected.
What Garage Liability Insurance Covers
A basic garage liability insurance policy will include the foundations of both general liability and commercial auto for garage owners. Here is what the policy typically will cover:
- Bodily Injury Coverage: If a customer slips and falls at your garage, this insurance will cover the medical bills for your customer, legal costs to defend yourself in a lawsuit, and third-party repairs.
- Third-Party Property Damage Coverage: If a client’s car is damaged while it’s being stored in your garage, you will be protected against the cost associated with replacing or repairing the car.
- Product Liability: If you install a faulty part as part of a repair and it causes damage property damage, your garage liability protection will cover this scenario.
- Legal Costs & Attorney Fees: Need to defend yourself in a lawsuit? Liability covers the legal costs associated with a lawsuit brought to you regarding third-party bodily injury and third-party property damage.
What Garage Liability Insurance Doesn’t Cover
As a foundational piece of insurance, liability is important and necessary. However, while liability insurance covers injuries and third-party property damage, it will not cover all of the scenarios that may befall your business. Here are some specific things garage liability won’t cover:
- Employee Injuries: Injuries to an employee are covered under worker’s compensation insurance.
- Damage To Your Property: While damage to other people’s property is covered, you will need commercial property insurance to file a claim for assistance repairing your own damage after an accident or incident.
- Negligence: If it’s proven that accidents happened because of your own negligence, the insurance company doesn’t have to pay the claim.
- Fire/Flood/Property Damage Sustained From A Natural Disaster: Some natural disasters are covered under commercial property insurance; however, flood and earthquake are often extra endorsements, so be sure to check the specifics of your policy.
- The Loss Of Income If You Need To Close Your Doors: Business interruption insurance will help with lost income and the cost of relocation if a disaster or accident causes you to shut down your business (or if a leader property suffers damage) and you lose money.
Types Of Businesses That Need Garage Liability Insurance
This type of insurance was created specifically for businesses in the automotive industry. If your business stores or transports vehicles (auto repair, glass repair, towing company, etc.), garage liability insurance should become your foundational insurance policy.
You can’t prepare for every potential accident and risk, and you benefit from having basic coverage. Frivolous (or not-so-frivolous) lawsuits will happen to the majority of small businesses. If you are still on the fence, you should definitely consider a garage liability plan if:
- You have a physical garage that stores vehicles
- You work with other people’s vehicles/repairs
- You work with clients that might require proof of insurance
- You run advertisements
- You have a collection of commercial vehicles
This includes auto and repair shops, auto dealerships, gas stations, car washes, towing companies — you name it. Don’t let the name “garage” fool you. If you work with other peoples’ cars at all, garage liability is a must.
How Garage Liability Policies Works
A garage liability policy works specifically for auto repair shops, car detailers, tow truck company, car dealerships, and valet parking. The garage liability policy is for protection against damage to your customers’ vehicles and bodily-injury of your customers while they are on your property.
If a customer slips and falls at your business or injures themselves getting into a car in your garage, their lawsuit or medical bills are covered under your garage liability insurance.
There is a different policy called garagekeepers liability that adds protection for your business operations. A garagekeepers insurance policy also is the insurance you’ll need to be protected against property damage done to vehicles on your property due to company/employee mistakes. (A garage keeper’s policy also adds umbrella coverage to theft of a client’s car or damage done to the vehicle while it’s on the road.)
Additional Types of Liability Insurance
For all of the things your basic garage liability insurance doesn’t cover, there are other insurance policies that can help you fully protect your business. Garage liability is the foundation, but once you’ve started with that policy it’s easy to add others and bundle your policies with other insurance options. So, what options do you have?
Here are the main liability insurance policies available for businesses:
|Insurance Type||What It Does||Who It's For|
Often called "slip and fall" insurance, this insurance protects your business from the threat of a lawsuit.
Directors & Officers Liability
This insurance protects the company and its directors from frivolous lawsuits.
A business with figureheads that could attract legal attention
Protects your business from the costs of a data breach or hacking or other cyber crimes.
Businesses that gather information about clients and store it online
Protects your buildings and things inside your buildings from damage and accidents.
Businsses with a physical property site and products located in those physical locations
Protects a business from a lawsuit related specifically to the product it sells.
Any business that manufactures, sells, or distributes a product
Pays your workers salary and medical bills in the event of an on-the-job accident or injury.
All businesses with one or more employees
If your business has to stop because of property damage, this will cover the cost of moving your business to a new location.
Businesses that need a specific location to keep open
Talk with an insurance expert to see which policies are right for your business.
How Much Does Garage Liability Insurance Cost?
As with all insurance policies, the cost will largely be determined by the type of business you run. Larger businesses with more places and vehicles to insure will pay more. However, garage liability insurance is not terribly expensive and the cost should be considered part of your company’s risk management plan.
According to CoverWallet, the average monthly price for garage liability is between $30-50 a month. Some of the things that may affect that monthly premium are:
- Your specific risks
- How much liability insurance you need
- What type of business you run
- The size of your business
- How many employees you have
- The location of your business
Other Insurance Policies Garage Businesses Need
Beyond liability policies, what are some other insurance policies that might be a good fit for your garage business? Insurance is about protecting the business you love and cherish — here are a few other options for insurance to provide full coverage.
As mentioned above, there are two types of garage insurance. Garage liability protects third-party claims, but won’t help pay for damage done to your own business or some of the damage done to vehicles left and stored overnight and are the victims of theft/vandalism. A garagekeepers policy protects clients against damage to a customer’s vehicle including fire, theft, weather, and vandalism. However, faulty workmanship or out-of-date warranties are not covered. This should be considered as a mandatory add-on to garage liability.
Garage liability insurance is foundational for your auto repair, tow company, or valet service. You want to make sure you are running the best business you can, and that includes having adequate insurance so that if the worst happens, your business can stay up and running.
Finding a great policy is about research. Know the averages for your industry and compare competing rates. Start with an idea of the risks your business might face. Answer the important questions, like how many locations do I have? How many vehicles do I need to insure? Then come equipped to your first meeting with an insurance company with the knowledge of what you need.
Your garage business needs protection; you are working with expensive equipment and vehicles, big-ticket items that need coverage. If the costs feel overwhelming, remember there are business loans specifically designed for auto repair shops to help. Don’t make the mistake of under-insuring your business out of optimism or denial. Some policies are as low as a dollar a day, and with insurance, no one’s small business story has to end in financial ruin. Check out our other Merchant Maverick advice for auto shops to learn the latest tips and tricks for running a successful auto shop.