When you operate an auto repair business, your company could be affected by many common risks, such as an accident that damages a customer’s vehicle, someone suffering an injury on your premises, or a fire that destroys property. Unforeseen disasters could have a severe impact on your business, making it difficult to continue operating. A broad range of insurance policies can help protect your business from the financial consequences of unexpected lawsuits or incidents.

What insurance coverage do I need for my auto repair business?

There are many types of insurance coverage to consider, but these policies are particularly relevant to auto repair businesses:

Commercial Property Insurance

Commercial property insurance will protect the value of your business property if it is destroyed or damaged. Coverage includes buildings, furniture, computers, equipment, supplies, and other property. If an unexpected disaster strikes your auto repair business, commercial property insurance can help provide funds to replace or repair any damaged business property. Commonly covered causes of loss include fire, theft, storms, hail, explosion, water damage, and vandalism.

Example:

• A fire breaks out in your auto repair shop, damaging equipment, inventory, and part of your building. Your commercial property insurance would pay to replace any damaged equipment and inventory, as well as pay to repair your building. 

Business Interruption Insurance

As an auto repair company, you need your repair shop and equipment to operate. If your property is damaged and you’re forced to close your business, you could lose significant income, while still having to pay fixed operating expenses like rent, utilities, and payroll. Business interruption insurance, also called business income insurance, is a common addition to a commercial property policy that provides coverage for lost income and operating expenses related to property damage.

Example:

• An overloaded circuit causes a fire to break out in your repair shop. You are unable to operate for several months while the building is repaired. Business interruption insurance will cover your losses in income and operating expenses while you are temporarily closed.

General Liability Insurance

General liability insurance protects your company from claims of third-party bodily injury, property damage, personal injury, and advertising injury. When customers visit your location to have their vehicles serviced, there’s a chance that they could slip and fall or otherwise sustain an injury. If customers, vendors, or partners hurt themselves on your property, your business could be held liable. 

General liability insurance also provides coverage for injury or damage caused by your products and completed operations. If a car part is installed incorrectly and ends up damaging a customer’s property or causing an injury, this coverage will step in to pay for the damages.

Examples:

• Bodily injury: A customer slips on ice in your parking lot and falls, fracturing her elbow. Your general liability insurance would cover medical costs and legal fees if the client sues.
• Products and completed operations: Your mechanic installs faulty brake pads on a customer’s vehicle. The customer ends up crashing into his own garage door due to the brake pads. Your general liability insurance would cover the damages.

Garage Liability Insurance

Designed for companies in the automotive industry, garage liability insurance covers accidental third-party injury or property damage that arises from your garage operations as well as providing commercial auto liability coverage. It’s important to understand that general liability insurance commonly excludes injury or damage that results from garage operations.

Example:

• While walking through your repair bay, a customer trips over a tool case and falls, hitting his head. The customer requires medical attention and is found to have a concussion. Your garage liability insurance would cover his medical bills and provide funds for legal fees and any resulting settlement if he sues.

Be aware that the property damage coverage in garage liability insurance does not extend to vehicles that are left under your care, custody, or control, so it would not cover your customers’ cars. In order to cover customer vehicles, you’ll need garagekeepers insurance.

Garagekeepers Insurance

Garagekeepers insurance provides coverage for customers’ vehicles while they are at your auto repair shop for repair, storage, or service. This is a crucial coverage for auto repair shops since they typically have many customers’ vehicles on their premises being repaired or awaiting service. If an unexpected disaster damages a customer’s vehicle while it is in your care, garagekeepers insurance will reimburse you for the damages.

Example:

• While moving one customer’s car out to the parking lot for pickup, your employee accidentally backs into another customer’s vehicle, which was parked and waiting for repair. Garagekeepers Insurance would cover the damages to both customers’ vehicles. 

Pollution Liability Insurance

Pollution liability insurance covers bodily injury, property damage, and cleanup costs caused by pollutants that are released in the course of your company’s work. Since auto mechanics work with fuel, oil, solvents, and other toxic chemicals, they have a higher exposure to pollution claims. If you are held liable for causing pollution-related damage, you may be required to pay for costly cleanup costs and fines. Pollution liability insurance will provide financial support if your company causes environmental damage. 

Example:

• A tank holding used oil develops a leak and contaminates soil and groundwater in the area. Your pollution liability insurance would cover damages and legal fees.

Commercial Auto Insurance

Commercial auto insurance is necessary to cover your company’s vehicles. This coverage is particularly important if your company offers towing services, but it also comes into play if your employees drive vehicles to pick up car parts or to transport customers. If an employee is in an accident while driving for business purposes, commercial auto insurance can provide coverage for physical damage to vehicles, third-party bodily injury, and property damage.

Example:

• While driving a tow truck to collect a broken down vehicle, your employee changes lanes without adequately checking his blind spot and collides with another vehicle. Your commercial auto insurance would cover the damages. 

Workers’ Compensation Insurance

Workers’ compensation insurance provides financial and medical benefits for your employees or their survivors in the case of a work-related injury, illness, or death. This coverage is legally required in almost all states, and companies may face severe fines or penalties if they do not abide by state guidelines for workers’ comp. Even if you enforce safety regulations and encourage your employees to be careful, working in an auto repair shop can be physically dangerous, so it’s critical to make sure that you have adequate workers’ compensation coverage. 

Example:

• One of your mechanics develops a severe rash and eye irritation from working with toxic solvents at your repair shop. Your workers’ comp insurance would cover her medical bills. 

Errors and Omissions Insurance

Errors and omissions insurance protects your auto repair company from allegations of mistakes or negligence in your professional work. Even though your mechanics are likely well trained and meticulous in their work, there is always a possibility that a mistake could be made.

The products and completed operations portion of general liability insurance covers property damage or injuries caused by your work, but it doesn’t cover damages due to work that hasn’t been completed yet or damage to your own products or work. If a mechanic inadvertently damages a car while working on it, your company would have to cover the damages unless you have errors and omissions insurance. 

Example:

• While making repairs to a customer’s car windows, your mechanic accidentally shatters a window. Your errors and omissions insurance would cover the damages. 

Commercial Crime Insurance

Commercial crime insurance provides funds to reimburse you for losses caused by theft, robbery, fraud, forgery, burglary, and other crimes. This coverage applies both to crimes committed by outside parties and crimes committed by your own employees. Since auto repair companies typically own expensive inventory and equipment, they could be vulnerable to theft or other crimes. Commercial crime insurance can provide financial protection from crime-related losses.

Example:

• After noticing irregularities in your inventory, you realize that one of your employees has been stealing car parts and selling them. Your commercial crime insurance would reimburse you for the loss.

Equipment Breakdown Insurance

As an auto repair shop, you likely rely on specialized equipment such as lifts. If equipment breaks down, it can impact your ability to complete your work. Although some business owners may believe that commercial property insurance would cover these situations, equipment breakdowns are typically excluded from commercial property coverage.

Commercial property insurance covers damage to equipment caused by covered perils, like a fire or storm. If a piece of equipment breaks down due to something internal, like a mechanical failure, equipment breakdown insurance can step in, providing funds to repair or replace damaged equipment and cover lost business income while the equipment is out of commission.

Example:

• One of your hydraulic lifts breaks down due to wear on its internal mechanisms. This delays all of your waiting repair jobs and makes it impossible for you to accept additional cars for repair. Your equipment breakdown insurance would pay for repairs to the hydraulic lift and reimburse you for lost income. 

Additional Coverages

• A business owner’s policy (BOP) can be a great choice for small and midsize auto repair shops. It combines general liability, property, business income, and extra expense coverage into a single package, which is often cheaper than purchasing similar coverage separately.
• Cyber liability insurance can cover financial losses that result from cyber events such as data breaches, hacking, viruses, denial of service attacks, and more. This is an important coverage to consider for auto repair companies since they may store customers’ credit card numbers and other personally identifiable information. 
• Employment practices liability insurance (EPLI) protects your business against lawsuits by employees who accuse your business of wrongful treatment, including discrimination, harassment, or other employment-related issues.

Pricing and Quotes

Pricing for auto repair shop insurance will vary based on the type of insurance coverage and the risk profile of your business. Insurers consider factors such as:

• Business size
• Industry
• Location
• Number of employees
• Claims history

Businesses with higher risks will have higher premiums than those deemed lower risk. For example, an auto repair shop with a history of frequent claims will face higher premiums. Premiums also rise as you increase the limits of insurance. Different insurance companies have different models for rating risks, so it is worth comparing pricing across different insurers.

In order to get an accurate estimate on pricing, it’s best to get a quote from a reputable insurance company. Below we’ve highlighted a few of our trusted partners who offer coverage for auto repair shops:

Provider	General Liability	Professional Liability	Business Owner's Policy
Embroker	??	??	??
CoverageSmith	??	??	??
CoverWallet	??	??	??
Hiscox	??	??	??
Thimble	??	??	??

Final Word

As you plan your insurance coverage, it’s important to be aware of the risks that your auto repair businesses could face. From accidental customer injuries to the possibility of damage to customers’ cars in your care, there are many incidents that can have a major impact on your company’s finances. It’s a good idea to purchase a range of business insurance that can provide valuable financial protection and help your company weather any unforeseen catastrophes or lawsuits.