The Complete Guide To Garage Liability Insurance

You’ll likely need garage liability insurance if you run an auto repair shop, auto dealership, gas station, or tow service. Unlike other liability insurance plans, this policy will specifically help insure your business when vehicles stored and maintained on your site are involved in accidents or sustain damages for which you’re at fault.

Liability insurance is crucial to protecting your small business from lawsuits and accidents, but not all liability insurance policies are the same. So what exactly is garage liability insurance, and do you need it? And the big question: How much is it to have garage liability insurance? Keep on reading to find out.

What Is Garage Liability Insurance?

Garage liability insurance (also called repair shop insurance) is a special type of general liability insurance plan for businesses that use or store vehicles as part of their essential day-to-day operations. A good garage liability insurance policy with ample coverage will include both general liability and auto liability exposures.

The goal of garage liability is twofold:

• To provide peace of mind and protection for your business when the vehicles in your care inflict bodily injury or property damage to customers, visitors, and third parties both on and off your business premises. Vehicles may include cars, trucks, bikes, and other equipment and machinery stored onsite.
• To help with the expenses of liability for slip and fall accidents at your place of business. If a non-employee gets hurt or if their personal belongings are damaged, garage liability insurance covers that. It will also cover the legal fees if they file a lawsuit.

Your policy coverage will depend on what kind of business you run. If you’re simply storing vehicles onsite, your policy will be different from someone actively repairing vehicles onsite or driving them onto the streets. Check with an insurance expert to determine the amount of coverage your business needs to be adequately protected.

What Does Garage Liability Insurance Cover?

A basic garage liability insurance policy will include general liability and commercial auto foundations for garage owners. Here’s what the policy typically covers:

• Bodily Injury Coverage: If a customer slips and falls at your garage, this insurance will cover the medical bills for your customer.
• Product Liability: Say you fix your customer’s car with a bad tire, and this causes the vehicle to get into an accident. If you install a faulty part as part of a repair and it causes 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 of a lawsuit against you regarding third-party bodily injury and third-party property damage.

What Doesn’t Garage Liability Insurance 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 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. Commercial auto insurance will cover damage specific to vehicles used for business purposes.
• Third-Party Property Damage Coverage: If a client’s car is damaged while it’s being stored in your garage, garage keepers liability insurance protects you against the cost of replacing or repairing the car. A garage liability policy won’t do this on its own.
• Negligence: The insurance company doesn’t have to pay the claim if it’s proven that accidents happened because of your negligence.
• Fire/Flood/Property Damage Sustained From A Natural Disaster: Some natural disasters are covered under commercial property insurance; however, flood insurance and earthquake insurance 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.

How Does Garage Liability Insurance Work?

A garage liability policy works specifically for auto repair shops, car detailers, tow truck companies, car dealerships, and valet parking. The best way to think of garage liability is as if it were a third-party liability policy focused on vehicle-associated risks.

The garage liability policy is for protection against property damage and bodily injury of your customers while they are on your property and of non-employees involved in an accident or mishap caused by vehicles in your care. 

Garage liability protects third-party claims, but on its own, it won’t help pay for:

• Damage done directly to your store or property
• Some of the damage done to vehicles left and stored overnight
• Property damage caused by theft/vandalism (neither for your property nor your customers’)

A garage keepers policy protects clients against damage to a customer’s vehicle due to company/employee mistakes and harm resulting from fire, theft, weather, and vandalism. However, faulty work or out-of-date warranties are not covered. This should be considered as a mandatory add-on to garage liability.

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 repair or work with other people’s vehicles
• 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 require a vehicle to perform your usual business operations, or if you work with other peoples’ cars at all, garage liability is a must.

How Much Does Garage Liability Insurance Cost?

The cost of your business insurance will largely be determined by the type of business you run. Larger businesses with more places and vehicles to insure will pay more. Garage liability insurance can be a bit more expensive than general liability insurance, but the cost should be considered part of your company’s risk management plan.

The average monthly price for garage liability is between $83-108 a month. Some of the things that may affect that monthly premium are:

• Your specific risks
• How much liability insurance you need
• The type of business you run (for example, whether it’s a car dealership, roadside assistance service, or mechanic shop)
• The size of your business
• How many employees you have
• The location of your business

How To Get Garage Liability Insurance

Your garage business needs protection. You’re working with expensive equipment and vehicles — big-ticket items that need coverage.

Are you ready to get your business insured? Here are the steps you should take so that you can get the best possible coverage:

1) Determine How Much Coverage You Need

Start with an idea of the risks your business might face. Answer the important questions, such as how many locations do I have? How many vehicles do I need to insure? From there, you can come equipped to your first meeting with an insurance company with the knowledge of what you need.

A good place to generally start is with $1 million in liability coverage. Of course, this number will change depending on your business’s needs and what risks you’re most susceptible to. Don’t be intimidated by a higher premium if you know for a fact that the day-to-day activities of your business make it more likely for your business to be liable for accidents or damages.

2) Research The Market

Finding a great policy is all about research. Know the averages for your industry and compare competing rates.

Usually, insurance carriers that provide general liability and commercial auto insurance will also offer garage liability insurance. If you’re currently insured, check with your insurance provider or broker to see if you can add garage liability to your policy.

3) Shop For Quotes

Now it’s time to go shopping for the best policy! Many sites, such as Coverwallet, Coverhound, and Insureon, will do the comparison shopping for you and walk you through the steps required to make an insurance purchase.

If the costs feel overwhelming, remember there are business loans specifically 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.

Additional Types Of Liability Insurance

As mentioned above, garage keepers liability protects your business operations, including your customers’ vehicles.

For all of the things your basic garage liability insurance doesn’t cover, other insurance policies 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 other insurance options and bundle your policies. So what options do you have?

Here are the main liability insurance policies available for businesses:

Talk with an insurance expert to see which policies are right for your business.

The Benefits Of Garage Liability Insurance

Garage liability insurance is a necessity if you own a business in the automotive industry. If you’re still on the fence, consider these important benefits of garage liability insurance:

• Much-Needed Financial Protection: Garage liability insurance is foundational for your auto repair, tow company, or valet service. You want to make sure you’re running the best business you can, including having adequate insurance; if the worst happens, your business can stay up and running.
• Compliance With Local Laws: In some states, such as Florida and Texas, auto dealers must have garage liability insurance. Don’t risk facing fines by neglecting to purchase the proper coverage.
• Protection For Your Assets: If you are in a lawsuit and aren’t prepared to shoulder the payments, your business could end up in financial jeopardy. Garage liability insurance can protect your assets from being seized to pay for damages and legal fees.
• Client/Customer Confidence: Garage liability insurance can help build clients’ and customers’ confidence in your business. Having the right coverage shows that you manage your business responsibly and value their interests and safety while on your premises.

Garage Liability Insurance FAQs