A Comprehensive Guide to Garage Insurance: Definition, Coverages and Cost

Garage insurance is usually associated with the automotive industry since all the automobile dealerships, parking lot operators, tow-truck operators, and similar professions are required to add a garage policy to their business liability coverage.

It can save the business owner from extremely high costs caused by third-party damages and injuries, but the total list of coverages will depend on your insurance carrier and your needs.

The following article will explain all the vital aspects of garage insurance coverage, including its definition, price, and a list of businesses that should purchase it.

What is Garage Liability Insurance?

Garage liability insurance is a special type of coverage that’s targeted to the automotive industry. It protects all the vehicles from theft and vandalism while being on your premises, and such vehicles may include cars, trucks and bikes.

It provides protection from a variety of third-party injuries and property damages that often happen at repair shops or similar facilities. It’s vital to purchase sufficient insurance to protect your business form inconveniences and consequences of unforeseen events.

Garage liability insurance is perceived as a type of umbrella coverage, which means that it provides an additional layer of protection to the business general liability policy, which is usually included in commercial insurance.

Who Needs Garage Insurance?

All the businesses that offer garaging services and vehicle repairments should protect themselves from high expenses caused by lawsuits and damages.

Such businesses may include:

• Auto dealerships
• Automotive repair shops
• Body shops
• Muffler shops
• Tire and battery repair shops
• Tow lots
• Transmission shops

In case of theft, vandalism, adverse weather conditions, or any other damage, all the above-mentioned businesses may face a severe financial loss due to repairment or replacement of their customers’ vehicles.

To avoid such risks, all of the automotive businesses are advised to purchase garage insurance that will protect their customer’s vehicles from a wide range of damages. Investing in appropriate coverage provides peace of mind and proves your loyalty to customers and their cars.

What are the Types of Garage Insurance?

There are many types of garage insurance you can choose based on your needs and preferences. Each of them covers different kinds of accidents, and they are usually purchased separately.

Here are the most common garage coverages:

Garage Liability Insurance

Garage liability insurance will cover for the financial costs of medical bills, property damage and legal fees due to third-party accidents on the physical business location or during business interaction.

The policy will pay claims to consumers, vendors, or bystanders who may be injured or have their property damaged as a result of usual business operations.

Accordingly, garage liability insurance will provide coverage to:

• Premises liability: In case your client, supplier, or any other person becomes injured while on your premises, your insurance policy will pay for medical bills.
• Products operations: Commonly, a technician’s work causes injuries to people or damages their vehicle. In case of such a situation, your garage liability coverage will pay for customer’s medical costs and repair bills for other vehicles affected in an accident caused by malfunction of your client’s car.
• Owned business car: All the vehicles owned and operated by the garage itself, such as vehicles used to pick up parts and tow trucks, will be covered for liability and physical damage.
• Clients’ cars: If your employee causes an accident while test-driving your customer’s car, your business will be protected from associated liability.
• Hired & non-owned cars: If your company rents vehicles or sends employees to complete their duties in their own vehicles, this policy will protect them in case of an accident they’re held liable for in that situation.
• On-hook coverage: If your services include towing, you will need exclusive on-hook coverage that will protect the vehicles being transported.

Garage Keepers Insurance

Many people find it difficult to distinguish between garage liability insurance and garagekeepers coverage. Namely, the only major difference between them is that garage keeper insurance protects your business from damage to your client’s vehicle while being in your care, which is not the case with garage liability.

This type of insurance is usually targeted to businesses that offer towing services or operate service stations, as well as car detailing and valet parking.

Garage keepers insurance will protect you from:

• Legal liability: Garage keepers legal liability insurance will protect you from the costs caused by damage to your customer’s car. It usually includes third-party vandalism and employees’ negligence.
• Direct primary: This is a form of coverage that protects the client’s vehicles regardless of liability. For example, if your client’s car becomes damaged by adverse weather conditions or someone steals it despite adequate protection, the direct primary policy will pay for the loss.
• Direct excess: Direct excess may remind you of umbrella insurance, which covers the costs that exceed your primary policy’s limit. Namely, if your client can’t provide sufficient coverage for the loss, direct excess will pay for the difference.

Garage keeper insurance also protects a car in your custody from damages caused by fire or collision.

Auto Dealer Liability

Auto dealer liability insurance is often called dealers open lot (DOL) or dealer’s physical damage coverage, and it protects jet skis, cars, trucks and even RVs (recreational vehicles) that are held in a dealer’s inventory for resale.

DOL coverage usually provides options for collision, comprehensive, specified causes or loss, or fire or theft. However, it can offer more possibilities based on your needs.

The four basic levels of protection included in DOL are:

• Unprotected lots
• Nonstandard protection
• Standard protection
• Building protection

What is Not Covered with Garage Insurance?

A typical garage insurance policy won’t cover for the following incidents:

• Injuries to employees: You should know that a garage liability policy won’t cover the injury for the employees and to the garage itself. Such situations will require workers’ comp and commercial property coverage.
• High costs: If the expenses exceed the limits of your premium, the remaining damage won’t be covered unless you have an umbrella or direct excess plans added to your insurance.
• Client property: Any damage to your client’s car won’t be covered with garage liability insurance, but you’ll need to add a garage keepers plan that will be effective in such situations.

In addition to these situations, you should know that your garage insurance will neither cover for the tools, building, personal, or business property of the policyholder, as well as for damages caused by hail.

Still, if you’d like to get full protection, consult your insurance carrier and ask them about other coverages you can add to your current plan.

What are the Additional Policies You Can Add to Garage Insurance?

Garage owners are advised to purchase some other vital policies that will provide them with full protection from various incidents. Such policies are:

• Commercial auto insurance: If you use vehicles for your business, then you’ll need commercial auto insurance. Some insurance carriers insure tow trucks and pickup trucks, which are the vehicles commonly used in the garage business.
• Workers’ compensation: Workers’ comp is officially required by almost every state, and it’s essential since it covers the medical costs of your employees who have hurt or become while performing their duties at work. It also provides coverage for their lost wages in case they’re unable to work for some time.
• Garagekeepers legal liability: This insurance will cover for the costs of physical damage to your customer’s car while being in your care, custody and control.
• Product liability insurance: Product liability insurance helps protect your business if you sell or manufacture faulty products that cause property damage to your client’s vehicle.
• Business interruption insurance: This type of insurance will cover for the loss of income due to the damage that forces your business to close temporarily. Some policies may also include payments for additional leased space to operate your business while your primary location is being repaired.

As a business owner, you are advised to purchase a business owner’s policy (BOP), which includes general liability, business property, business interruption and customer vehicles in care, custody, or control of your shop in a single policy. Such a solution is more practical and cost-effective than purchasing policies separately.

How Much Does Garage Insurance Cost?

Garage liability insurance cost usually goes from $300 to $1.000 a year when purchased separately.

However, when you add other essential policies to your plans, such as garage keepers, workers’ comp and commercial vehicle insurance, you can expect to pay from $2.000 to $6.000 for your annual premium.

Still, the following factors will have the highest impact on your total premium price:

• The annual revenue from your garage business: It is assumed that physically larger shops have higher yearly income, which is why they’ll probably pay more for garage insurance. Additionally, higher revenue is often associated with a higher risk of injuries, which also leads to more expensive premiums.
• The limits you choose: Your price will be determined depending on the limits that you want. The higher the limits, the pricier the insurance.
• The amount of deductibles you select: Your insurer carrier will ask you to choose the amount of deductible you’ll pay out of your pocket before the coverage kicks in. If you want a higher one, your premium price will be lower, while the lower deductible leads to a more expensive policy.
• The coverages you add to your insurance plan: If you want to get fully protected, you must be ready to pay more money for the policy that includes a variety of added coverages.

6 Ultimate Tips on Getting Lower Garage Liability Insurance Cost

If you figure out what your business needs are and how much limits you need, you can save a lot of money on your garage liability insurance policy.

Have a look at the 6 following tips on how to get an adequate policy for less money:

• Fully understand your business needs: When you know what your business needs are, your carrier will be ready to craft an adequate policy for you by combining various coverages. When you bundle more coverages at the same insurer, you may get significant discounts.
• Check out different carriers: The most common mistake among people is buying insurance at the first carrier the see. You’re advised to shop around and request garage liability insurance quotes at various insurance companies and agencies and compare the prices you’ve got.
• Install video surveillance equipment: By securing your business location, you have fewer chances of filing an insurance claim, which is why your carrier will be glad to give you a discount.
• Store your autos adequately: You’re advised to store your cars indoors overnight and make sure the premises are protected with locked fencing and other accompanying stuff. Additional security is key to lower premiums.
• Develop fire prevention policies: Fire is one of the most common reasons why properties get damaged, which is why you’re advised to ensure all the fire extinguishers and smoke detectors function correctly. It’s also recommended to install a sprinkler system.
• Hire employees with clean driving records: Your commercial auto insurance policy will be lower if driving records of your employees are clean, with no accidents, and severe violations.