Do You Need Garage Keepers Insurance?

Written by Darren Burch

September 14, 2024

When running an automotive business, selecting the right insurance coverage is essential. Terms like Garage Liability Insurance, Garage Keepers Insurance, and General Liability Insurance often cause confusion. Therefore, this comprehensive guide will help you distinguish between these policies and determine if Garage Keepers Insurance suits your business needs.

Introduction

Operating within the automotive industry presents unique risks and challenges. Whether you own a small repair shop or manage a large dealership, safeguarding your business against potential liabilities is crucial. The array of insurance options available can be overwhelming, and misunderstanding them could leave your business exposed to significant financial losses.

Moreover, insurance isn’t just about compliance or ticking a box; it’s about protecting your livelihood, your employees, and your customers. In this article, we’ll delve deep into the different types of insurance policies relevant to automotive businesses. By the end, you’ll have a clear understanding of why Garage Keepers Insurance might be the missing piece in your risk management strategy.

Understanding General Liability Insurance

General Liability Insurance is a must-have for all General Liability Insurance serves as the foundation for most business insurance plans. It protects against common risks that any business might face, regardless of the industry. Specifically, it covers:

  • Bodily Injury: If a customer slips and falls in your showroom, General Liability Insurance can cover their medical expenses and any legal fees if they decide to sue.
  • Property Damage: Should one of your employees accidentally damage a client’s property while on a service call, this policy steps in to cover the repair or replacement costs.
  • Personal and Advertising Injury: This includes protection against claims of libel, slander, or false advertising that could arise from your marketing efforts.

However, while General Liability Insurance is broad, it doesn’t address risks unique to automotive businesses. For instance, it won’t cover accidents involving vehicles you own or customer vehicles left in your care.

Limitations in Automotive Context

In the context of an automotive business, General Liability Insurance has significant gaps:

  • Vehicle-Related Incidents: It doesn’t cover accidents involving business-owned vehicles or customer cars.
  • Faulty Workmanship: If a repair you performed leads to a customer’s car malfunctioning and causing an accident, General Liability won’t cover the damages.

Therefore, relying solely on General Liability Insurance could leave your business vulnerable to substantial claims.

What Is Garage Liability Insurance?

Insurance companies tailor Garage LiabilityGarage Liability Insurance is designed specifically for businesses operating in the automotive sector. It builds upon General Liability Insurance by adding coverages that address industry-specific risks.

Key Coverages Included

  • Auto Liability: This component covers bodily injury and property damage resulting from accidents involving vehicles owned by your business. For example, if one of your employees test-drives a customer’s car and causes an accident, Auto Liability coverage can help pay for the damages.
  • Operations Liability: Protects your business from claims arising out of the services you provide. If, for instance, a faulty repair leads to a customer’s vehicle malfunctioning on the road, this coverage can help with legal fees and settlement costs.

How It Differs from General Liability

Unlike General Liability Insurance, Garage Liability Insurance considers the automotive nature of your operations. It acknowledges that vehicles are central to your business and that the risks associated with them require specialized coverage.

Limitations of Garage Liability Insurance

Despite its tailored approach, Garage Liability Insurance doesn’t cover everything. Notably, it excludes damages to customer vehicles left in your care. This means that if a customer’s car is stolen, vandalized, or damaged while on your premises, Garage Liability Insurance won’t cover the loss.


The Need for Garage Keepers Insurance

This is where Garage Keepers Insurance comes into pThis is where Garage Keepers Insurance becomes essential. It fills the coverage gap left by General Liability and Garage Liability policies by specifically protecting customer vehicles under your care, custody, or control.

What Does Garage Keepers Insurance Cover?

  • Customer Vehicles: Whether you’re servicing, repairing, or storing vehicles, this policy covers physical damages to those cars.
  • Comprehensive Coverage: Protects against non-collision-related incidents like theft, vandalism, fire, and weather-related damages. For example, if a hailstorm damages vehicles parked on your lot, Garage Keepers Insurance can cover the repair costs.
  • Collision Coverage: Covers damages resulting from collisions, regardless of who is at fault. If an employee accidentally backs a customer’s car into a wall, this coverage applies.

Types of Garage Keepers Insurance

There are different levels of Garage Keepers Insurance to suit various needs:

  1. Legal Liability Coverage: Pays for damages to customer vehicles only if your business is legally liable.
  2. Direct Primary Coverage: Covers damages to customer vehicles regardless of fault, even if another party caused the damage.
  3. Direct Excess Coverage: Acts as secondary coverage, paying for damages exceeding the customer’s own insurance limits.

Choosing the right type depends on your risk tolerance and the nature of your operations.

Old 1950's pickup truck in the auto repair shop.

Comparing the Three Policies

Understanding the distinctions between these policies is crucial for comprehensive protection.

Therefore, to ensure your automotive business is fully protected, you may need all three policies.


Do You Need Garage Keepers Insurance?

If your business involves:

If your business operations involve handling customer vehicles, then Garage Keepers Insurance is not just beneficial—it’s essential.

Businesses That Need Garage Keepers Insurance

  • Mechanics and Repair Shops: You have multiple customer vehicles in your shop daily. If a fire breaks out, you could be responsible for all those vehicles.
  • Body Shops: Beyond repairs, you’re often repainting and restoring vehicles, which can be costly. Damage to these vehicles could result in significant financial loss.
  • Valet Services and Parking Garages: You take possession of customer vehicles, sometimes high-value ones. Theft or vandalism could lead to substantial claims.
  • Car Dealerships: With numerous customer and owned vehicles on-site, the risk multiplies. Weather events like hailstorms can cause extensive damage.
  • Tow Truck Companies: Transporting vehicles carries inherent risks. Accidents during towing could damage customer vehicles.

Scenarios Illustrating the Need

  • Theft Incident: A customer’s car is stolen from your secured lot overnight. Without Garage Keepers Insurance, you’re liable for the loss.
  • Natural Disaster: A severe storm causes a tree to fall on vehicles parked outside your shop. Garage Keepers Insurance would cover the repair costs.
  • Employee Error: An employee accidentally damages a customer’s vehicle while moving it. Collision coverage under Garage Keepers Insurance handles this.

Benefits of Proper Coverage

Securing the right insurance isn’t just about mitigating risks; it offers tangible benefits that contribute to your business’s success.

Financial Protection

  • Avoid Significant Expenses: Unexpected damages can lead to hefty out-of-pocket costs. With Garage Keepers Insurance, these expenses are covered, preserving your bottom line.
  • Stable Cash Flow: Knowing that potential losses are insured allows for better financial planning and stability.

Customer Trust

  • Peace of Mind: Clients are more likely to trust businesses that can assure them their vehicles are protected.
  • Reputation Management: Handling incidents professionally and efficiently, thanks to proper insurance, enhances your reputation.

Legal Compliance

  • Meet Contractual Obligations: Some contracts or partnerships may require specific insurance coverages.
  • Regulatory Requirements: Certain jurisdictions mandate businesses to carry Garage Keepers Insurance.

Competitive Advantage

  • Stand Out in the Market: Offering assurances that competitors might not can set you apart.
  • Customer Retention: Satisfied customers are more likely to return and refer others.

How to Obtain Garage Keepers Insurance

Acquiring Garage Keepers Insurance involves several steps to ensure you get the coverage that fits your business. The easy answer is to contact Burch Insurance Group and let them build the policy you need for your business.

Assess Your Needs

  • Evaluate Risks: Consider the types of vehicles you handle and the potential risks involved.
  • Determine Coverage Limits: Higher-value vehicles may require higher coverage limits.

Customize Your Policy

  • Select Coverage Type: Decide between Legal Liability, Direct Primary, or Direct Excess coverage based on your needs.
  • Add Endorsements: Consider additional coverages for specific risks, such as employee dishonesty or tools and equipment.

Regularly Review Your Policy

  • Annual Updates: As your business grows, your insurance needs may change.
  • Adjust for Changes: New services or increased inventory may require policy adjustments.

Conclusion

In the automotive industry, risks are inherent and varied. From accidental damages to customer vehicles to unforeseen natural disasters, the potential for financial loss is significant. Therefore, having the right insurance coverage is not just a legal formality but a business imperative.

General Liability Insurance provides a foundational level of protection but falls short in covering automotive-specific risks. Garage Liability Insurance adds a layer tailored to vehicle operations but still doesn’t protect customer vehicles under your care. Only Garage Keepers Insurance fills this critical gap, ensuring that you are covered comprehensively.

Don’t leave your business vulnerable. Protecting your assets, reputation, and customers’ property is essential for long-term success. By securing Garage Keepers Insurance, you demonstrate professionalism and a commitment to excellence.


Take Action Today

  • Assess Your Current Coverage: Review your existing insurance policies to identify any gaps.
  • Consult an Insurance Professional: Seek advice from experts who understand the nuances of automotive business risks.
  • Get a Free Quote: Burch Insurance Group offers free quotes and will customize your policy for you.

Remember, investing in the right insurance today can save you from significant losses tomorrow. Ensure your business is fully protected with Garage Keepers Insurance and focus on what you do best—providing top-notch automotive services to your customers.


By understanding these insurance options and their importance, you can make informed decisions that safeguard your business’s future. Additionally, proper coverage not only mitigates risks but also enhances your credibility in the competitive automotive market.

Get a free quote today and ensure your business is fully protected.

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