Garage Liability

Garage Liability Insurance 101


Garage liability insurance is required if you want to obtain a Dealers License that allows you to sell new or used vehicles as a part of your business operations. Basically, a garage liability insurance policy acts as car insurance for the cars that you are selling. Let’s take a closer look at how this unique type of insurance works.

What is Garage Liability?

Again, garage liability insurance is a must-have if you want to obtain a Dealers License and sell used or new vehicles. Parking lot or parking garage operators, tow-truck operators, service stations, and customization and repair shops may also choose to add garage liability insurance to their business liability coverage in order to protect their business from the expenses of property damage and bodily injury that result from normal business operations. 

This type of insurance will provide protection for all of the cars at your dealership when you drive them. 

Dealers frequently drive the cars they are trying to sell when taking the cars on test drives, driving the cars to and from auctions, and driving the cars to the mechanics. Understandably, these drives can lead to accidents just like driving a personal car can. 

How Garage Liability Insurance Works

​​​​​​​A garage liability insurance policy is an umbrella policy that provides protection against events that can occur in the day-to-day operations of a business in the automotive industry and can add an extra layer of protection to a business' general liability policy. 

Typically, garage liability insurance coverage includes bodily injury and property damage from direct garage operations. The benefit of a garage liability policy is that it covers events that aren’t generally covered under most commercial or business liability insurance policies. 

Coverage from a garage liability insurance policy can also extend to customer injuries that occur while on the business grounds. Typically, this type of policy also includes an employee dishonesty provision for theft or vandalism committed by an employee to a customer’s car.

For businesses looking for more coverage, they can add in coverage for any cars used to conduct business—usually at a premium. This may include courtesy vans or delivery trucks. Another additional piece of coverage can include protection for damages from parts or products sold by the company and coverage for loss from faulty parts installed on a client's vehicle. 

You also have the option to add physical damage coverage (both comprehensive and collision) to your garage liability coverage to achieve “full coverage.” Often, this level of coverage is required if you are working with a floorplan company or if you want to protect the vehicles you own from physical damage.

There are limitations to what garage liability insurance policies will cover, including:

  • Tools

  • Buildings

  • Personal or business property of the policyholder

  • Vandalism

  • Stolen vehicles

  • Damage from weather events such as hail

  • Accidents or damage to the customer's cars on-site for service

When it comes time to buy a garage liability policy, the business owner should verify that the garage liability coverage will add to their basic business liability coverage, not replace it. 

What is Garage-Keepers Coverage?

It’s important to understand that garage liability insurance is not the same thing as garage-keepers coverage, which is a separate insurance policy. Garage-keepers coverage protects businesses from claims they are legally obligated to pay as a result of loss or damage to a customer’s car such as fire, theft, or vandalism while the car was in a businesses’ care for servicing, repair, parking, or storing. Other potential coverage can be for damage that occurs during road test drives and while storing the vehicle throughout non-working hours. 

Garage-keepers insurance coverage is necessary for any business that will be keeping their customer’s vehicles in their care such as auto mechanics, repair shops, or any type of venture that keeps or works on cars that are not registered to the business. A business with multiple locations will need a garage-keepers coverage policy for each site they do business at. 

How is garage liability coverage written?

The premium for a garage liability policy is based on a number of different factors, such as:

  • Number of employees

  • Amount of coverage requested

  • Prior losses

  • The territory their business is located in

Worldwide Insurance Specialists, Inc. is ready to help you get the protection you need! In order to get a quote for a garage liability insurance policy, you’ll need to complete an application fully and a motor vehicle record will be run on each driver you employ to ensure they have a valid drivers license. A surcharge may be added for any driver or employee who is found to have a history with car accidents. If you had prior garage liability insurance coverage in the past, we will need to see a copy of your “Loss Run Report.” You can get a copy of this report by contacting your previous carrier or agent and requesting a copy.