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Understanding Garage Liability Insurance: Coverage, Costs, and Claims

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Understanding Garage Liability Insurance: Coverage, Costs, and Claims


Garage liability insurance is a key part of the automotive industry. This type of insurance provides protection for businesses involved in auto sales, repairs, and other car services. Here’s a quick answer to what you need to know about garage liability insurance:

  • Coverage: Protects against property damage and bodily injury resulting from daily business operations.
  • Importance: Essential for businesses like auto dealerships, repair shops, and parking garages to manage risks.
  • Target Audience: Auto-related businesses looking for comprehensive protection.

Running an auto business comes with unique risks. A customer may slip on oil in the garage, or a part installed incorrectly could cause damage. Garage liability insurance helps cover these situations, ensuring that your business remains protected and operational.

Why It Matters

For auto business owners, garage liability insurance is not just an add-on but a necessity. It fills the gaps that standard general liability insurance often leaves uncovered, specifically focusing on the unique challenges in the automotive industry.

Hi, I’m Ryan McEachron, CEO of ISU Insurance Services ARMAC Agency. With over two decades of experience in insurance and strong community involvement, I can help you understand how garage liability insurance can safeguard your business. Let’s dive into the essential details you need to know about this crucial coverage.

Garage Liability Insurance Coverage Infographic - garage liability insurance infographic pyramid-hierarchy-5-steps

What is Garage Liability Insurance?

Garage liability insurance is a specialized type of insurance designed for businesses in the automotive industry. This includes car dealerships, auto repair shops, service stations, and even parking lots. Essentially, if your business involves handling, repairing, or storing vehicles, garage liability insurance is crucial.


Garage liability insurance is a type of umbrella policy that provides coverage for bodily injury and property damage resulting from your business operations. It protects against claims that might arise from accidents or mishaps that occur on your business premises or during the course of your work.

Automotive Industry

This insurance is particularly important in the automotive industry due to the high-risk nature of the business. Whether you operate a small repair shop or a large dealership, the potential for accidents, injuries, and property damage is significant. For instance, a customer might slip and fall in your showroom, or a mechanic could accidentally damage a customer’s vehicle. Without proper insurance, these incidents could lead to costly lawsuits and financial strain.

Policy Basics

A garage liability insurance policy typically covers:

  • Bodily Injury: If a customer or third party gets injured on your premises or due to your operations, this coverage helps pay for medical expenses, legal fees, and settlements.
  • Property Damage: Covers damage to someone else’s property caused by your business operations. For example, if a technician accidentally damages a customer’s car while working on it.
  • Operations Coverage: This includes protection against claims related to the day-to-day operations of your business, which are not typically covered under standard commercial liability insurance.

Garage liability insurance does not cover the tools, building, or personal property of the policyholder. It also doesn’t cover damage to customers’ cars while they are on-site for service. For that, you would need garagekeepers insurance, a separate but complementary policy.

Real-World Example

Consider a scenario where a tow-truck operator accidentally damages a parked car while maneuvering in a crowded lot. The owner of the damaged car files a claim for the repairs. Garage liability insurance would cover the cost of the damages, protecting the tow-truck operator from out-of-pocket expenses.

Key Coverage Areas of Garage Liability Insurance

Bodily Injury

Bodily injury coverage is essential for any business in the automotive industry. This part of the policy protects you if someone gets hurt on your business premises. For example, if a customer slips on an oil spill in your garage, your insurance will cover their medical expenses up to the policy limits. This helps you avoid hefty out-of-pocket costs and potential lawsuits.

Property Damage

Property damage coverage addresses damage to other people’s property caused by your business operations. Imagine a scenario where a mechanic accidentally damages a customer’s car while repairing it. Garage liability insurance will cover the repair costs for the customer’s vehicle. This coverage is crucial for maintaining customer trust and avoiding financial strain from unexpected incidents.

Operations Coverage

Operations coverage is a broad term that includes various protections for the daily activities of your business. This coverage extends to:

  • Employee Dishonesty: Covers theft or vandalism done by an employee to a customer’s car.
  • Business Autos: For an added premium, you can include coverage for autos used in your business operations, like courtesy vans or delivery trucks.
  • Product Liability: Protects you from claims related to faulty parts or products sold by your business.

Key Takeaway: Operations coverage ensures that all aspects of your daily business activities are protected, from employee actions to the vehicles you use in your operations.

By understanding these key coverage areas, you can ensure that your garage liability insurance offers comprehensive protection for your business. This leads us to the next crucial topic: Comparing Garage Liability Insurance and Other Business Insurances.

Comparing Garage Liability Insurance and Other Business Insurances

When it comes to insuring your automotive business, it’s important to understand how garage liability insurance compares to other types of business insurance. Let’s break down the differences between garage liability insurance, garagekeepers legal liability, commercial general liability, and the business automobile policy.

Garagekeepers Legal Liability

Garagekeepers legal liability is often confused with garage liability insurance, but they cover different risks.

  • Garagekeepers insurance: This protects your customer’s vehicles when they are in your care, custody, or control. For example, if a customer’s car is vandalized or damaged in a fire while at your shop, this insurance covers the repair costs.

Commercial General Liability (CGL)

Commercial general liability (CGL) insurance provides broad coverage for general business risks but is not tailored for automotive businesses.

  • CGL insurance: Covers bodily injury, property damage, and personal injury claims that occur on your business premises or as a result of your business operations. However, it excludes many risks specific to the automotive industry.

Business Automobile Policy

A business automobile policy covers vehicles owned and operated by your business, unlike garage liability insurance, which does not cover these vehicles.

  • Business auto policy: Provides liability and physical damage coverage for vehicles used in your business operations, like service trucks or tow trucks.

Summary Table

Type of InsuranceCovers Customer’s Vehicle?Covers Business-Owned Vehicles?Covers General Business Risks?
Garage Liability
Business Auto

Key Takeaway

Understanding the differences between these insurance types ensures you get the right coverage for your automotive business. While garage liability insurance protects against general business risks, garagekeepers legal liability covers customer vehicles in your care, and a business automobile policy covers vehicles you own and operate.

Costs and Factors Influencing Garage Liability Insurance Premiums

When it comes to garage liability insurance, several factors can affect what you pay for coverage. Understanding these factors can help you manage costs and ensure you have the right protection for your business.

Coverage Limits

The amount of coverage you choose directly impacts your premium. Higher coverage limits mean higher premiums, but they also offer more protection. For example, a repair shop might opt for higher limits to cover potential large claims, while a smaller operation might choose lower limits to keep costs down.

Business Location

Where your business is located plays a significant role in determining your insurance costs. If you’re in an area with high crime rates or severe weather conditions, you might pay more. For instance, businesses in coastal areas like Mississippi may face higher premiums due to the increased risk of weather-related claims.

Claims History

Your business’s claims history is one of the most critical factors. Insurance companies look at your past claims to gauge risk. A repair shop with a recent $28,000 claim will likely pay higher premiums than a similar business with no claims. Keeping a clean claims history can help you secure lower rates.

Type of Business

Different types of automotive businesses have different risks. For example, an auto dealership might have different insurance needs compared to a muffler shop or a tow lot. Each type of business faces unique liabilities, which can affect the cost of insurance.

Additional Factors

  • Deductible Amount: Choosing a higher deductible can lower your premium, but you’ll pay more out-of-pocket if a claim arises.
  • Years in Business: Established businesses with a proven track record may receive better rates compared to new businesses.
  • Safety Measures: Implementing safety protocols and risk management strategies can also help lower your premiums. Insurance companies often offer discounts for businesses that take steps to reduce risk.

By understanding these factors, you can better manage your garage liability insurance costs and ensure your business is adequately protected.

Next, we’ll answer some frequently asked questions about garage liability insurance to clear up any remaining doubts you might have.

Frequently Asked Questions about Garage Liability Insurance

What is covered under garage liability insurance?

Garage liability insurance covers two main areas: bodily injury and property damage. This means it protects your business if someone gets hurt or if property is damaged due to your operations.

  • Bodily Injury: If a customer slips and falls while in your shop, this insurance can cover their medical bills and any legal fees if they sue.
  • Property Damage: If, for example, a customer’s car is damaged while being serviced, this insurance can help cover the repair costs.

Additionally, it often includes an employee dishonesty provision, which covers theft or vandalism done by an employee to a customer’s car. However, it does not cover your tools, building, or business property.

How does garage liability insurance differ from garagekeepers legal liability?

Though they sound similar, garage liability insurance and garagekeepers legal liability cover different things.

  • Garage Liability Insurance: This is an umbrella policy that covers bodily injury and property damage from your day-to-day operations. It does not cover damage to customers’ cars while they’re in your care.

  • Garagekeepers Legal Liability: This specifically covers damage to customers’ cars while they are in your possession. For example, if a customer’s car gets vandalized or stolen while parked in your garage, garagekeepers insurance would cover the damage.

Can garage liability insurance be customized for different automotive businesses?

Absolutely! Garage liability insurance can be tailored to fit the unique needs of different automotive businesses. For instance, you can add coverage for:

  • Courtesy Vans and Delivery Trucks: If you use vehicles for business operations, you can include them in your policy.
  • Faulty Parts and Products: Coverage for damages resulting from defective parts sold or installed by your business.
  • Employee Dishonesty: Protection against theft or vandalism by employees.

This flexibility ensures that whether you run a small repair shop or a large dealership, your business is adequately protected.

Next, we’ll dive into the claims process for garage liability insurance, including examples and the importance of timely reporting.

Claims and Claim Handling in Garage Liability Insurance


When it comes to garage liability insurance, understanding the claims process is crucial. Here’s a simple breakdown:

  1. Report the Incident: As soon as an incident occurs, report it to your insurance provider. This can usually be done online, by phone, or through your insurance agent.

  2. Documentation: Gather all necessary documentation. This includes photos of the damage, witness statements, police reports, and any other relevant information.

  3. Claim Review: Your insurance provider will review the claim. They may send an adjuster to inspect the damage and gather more details.

  4. Resolution: Once the claim is approved, the insurance company will handle the payouts for medical expenses, property repairs, or legal fees as needed.


To illustrate, let’s consider a couple of real-world scenarios:

  • Example 1: Bodily Injury: A customer slips on an oil spill in your repair shop and breaks their leg. With garage liability insurance, medical costs and potential legal fees would be covered, easing the financial burden on your business.

  • Example 2: Property Damage: An employee at your dealership accidentally damages a customer’s car while moving it. Although garage liability insurance doesn’t cover the customer’s vehicle, it would cover any damage to other property, like your shop or equipment.

Importance of Timely Reporting

Timely reporting is key in the claims process. Delays can lead to complications, such as:

  • Extended Investigation Time: The longer you wait, the more difficult it becomes to gather accurate information and evidence.
  • Potential Denial: Some policies have strict reporting timelines. Missing these can result in claim denial.
  • Increased Costs: Delayed claims can lead to higher costs due to worsening damage or escalating medical expenses.

In short, the faster you report, the smoother the process will be. Ensure your staff knows the procedure for reporting incidents promptly.

Next, we’ll wrap up with a conclusion on the importance of adequate coverage and how ISU Armac can help protect your business.


Garage liability insurance is essential for any automotive business. It provides protection against the unique risks associated with running a car dealership, repair shop, or other vehicle-related business. Without it, you could face significant financial losses from bodily injury or property damage claims.

At ISU Armac, we understand the complexities of the automotive industry. Our experts are dedicated to helping you find the right coverage to protect your business. We work with over 300 carriers to ensure you get the best rates and the most comprehensive coverage.

Adequate coverage is not just a legal requirement; it’s peace of mind. It ensures that you can focus on running your business without worrying about potential liabilities. Whether you need garage liability insurance, garagekeepers insurance, or any other type of coverage, we are here to guide you through the process.

For more information or to get a quote, contact us today. Our knowledgeable representatives are ready to help you navigate insurance and secure the protection your business needs.

Contact Information:

  • Phone: 888.619.2012
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Don’t wait until it’s too late. Protect your business with the right insurance coverage today.