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Whether you own an auto dealership, repair shop, or car wash, businesses in the automobile service industry are exposed to a variety of risks. When working with high-value property, equipment, and members of the public, a number of liabilities arise, making it especially important for your business to secure comprehensive insurance coverage.
Automotive Service Insurance Types
Commercial property insurance protects the value of your business property if it is damaged by a covered peril. Commonly covered perils include fire, lightning, explosion, windstorm, hail, theft, and vandalism. For auto service businesses, commercial property is an important coverage to make sure your commercial buildings, inventory, furniture, and equipment are protected in the case of a disaster. Property insurance can provide the funds for you to repair or replace damaged property.
Example:
- A fire starts in your auto dealership’s storage room, spreading to the offices and showroom. Your building is severely damaged, and much of your office equipment and furniture is destroyed. Commercial property insurance would cover the costs of repairing your building and replacing equipment and furniture.
Business interruption insurance, also called business income insurance, is commonly added to commercial property policies in order to provide coverage for loss of income and operating expenses related to property damage. Because much of your business likely depends on your commercial property, if your business needs to temporarily close shop due to property damage, business interruption insurance can provide you with funds to cover loss of income or revenue while your property is being repaired.
Example:
- An explosion in your car repair shop causes significant damage to your building, forcing you to shut down your business temporarily. While your business is closed, you still need to pay rent, utilities, and payroll, and you need to cancel all of your upcoming repair appointments. Business interruption insurance would cover your losses in income and operating expenses while your shop is being repaired.
Equipment breakdown insurance provides coverage for the repair or replacement of malfunctioned or damaged equipment and is commonly added to commercial property policies. While commercial property policies can cover property that is damaged by external forces, like fires or hurricanes, equipment breakdown insurance can cover property that breaks down due to an internal cause, like a system malfunction. For auto service businesses, much of the equipment used to service cars can be expensive and time-consuming to repair. Equipment breakdown insurance can provide the funds to repair or replace damaged equipment, as well as lost income while the equipment is being repaired.
Example:
- Your parking lift platform breaks down, preventing you from working on a number of vehicles at your auto repair shop. Equipment breakdown insurance would cover the repairs to the lift, as well as any lost income your business suffers due to the lift not working.
Commercial auto insurance protects your business from auto liability and also safeguards the value of the vehicles your business owns. If you or one of your employees is involved in a car crash and causes bodily injury or property damage to a third party, commercial auto insurance can provide coverage for damages. If your company vehicles are damaged by a covered peril, including collision, fire, theft, falling objects, and vandalism, commercial auto insurance can provide coverage.
This coverage is important for auto service businesses that use vehicles for business purposes, including providing towing or shuttle services, picking up parts and materials, or providing mobile repair services.
Example:
- One of your mechanics takes the company truck to pick up parts for a car you are servicing. On the way back, your mechanic becomes distracted on the road and rear-ends another vehicle. The other driver suffers a head injury and requires medical treatment. Your commercial auto policy would provide coverage for the other driver’s injuires, as well as physical damage to both vehicles.
General liability insurance provides coverage for unintentional third-party bodily injury, property damage, personal injury, and advertising injury. For auto service businesses that interact with members of the public, this is a critical coverage. If customers, vendors, or partners visit your business property, there is always a chance that an accident could occur and someone could get injured or property could be damaged. General liability can pay for any legal fees or damages in a lawsuit, and it can also cover medical expenses, regardless of fault.
It’s important to note that a common exclusion to general liability policies is injury or damage that arises out of garage operations, so this may impact many auto service businesses. To address this exclusion, your business can secure coverage through a garage liability policy, which provides coverage for accidents that are a result of your garage operations.
Example:
- A customer who visits your used car dealership slips on a wet floor in the entrance of your building. He injures his hip and must receive medical treatment. General liability insurance would provide coverage for any medical expenses as well as the costs of a lawsuit if the customer decides to sue.
Garage liability insurance provides coverage for accidental third-party bodily injury and property damage resulting from your garage operations. This coverage applies to bodily injury involving non-employees, including customers, vendors, and partners, and to damage involving third-party property, like a customer’s laptop.
Excluded from this property coverage, however, are autos under your business’s care, custody, or control, which would include customer cars left at your business for servicing, repair, storage, or safekeeping. For coverage of your customer’s autos, you’ll need garagekeepers insurance.
Example:
- While inspecting his car at your auto detail shop, a customer slips on some car wax on the floor and falls into a car bay. He suffers a number of injuries and sues your business for damages. Garge liability insurance would cover the costs of the lawsuit and any damages.
Garagekeepers insurance protects the value of your customers’ vehicles left in your care while being stored, parked, serviced, repaired, or attended to at your business premises. If vehicles are damaged or destroyed, garagekeepers insurance can provide compensation for the loss.
Example:
- A fire breaks out at your private car storage facility. Many of the luxury cars you store for your clients are damaged. Garagekeepers insurance would cover the loss to your customers’ cars.
Pollution liability insurance can provide third-party coverage for bodily injury, property damage, defense, and cleanup costs as a result of sudden and gradual pollution conditions resulting from your business’s work or property. Your auto service business may work with toxic or flammable chemicals such as oil, grease, hydraulic fluid, gasoline, and other substances that may cause damage or injury to people or the surrounding community.
Example:
- Motor oil leaks out from one of the storage containers in your auto repair shop, seeping into the ground and contaminating a nearby lake. As a result, the city sues your business for environmental contamination of the lake. Pollution liability insurance would cover any damages or cleanup costs.
Commercial crime insurance provides protection from financial losses related to crimes such as theft, burglary, robbery, forgery, and fraud. While most commercial property insurance policies do not cover losses from crimes committed by employees and offer limited coverage for losses from crimes committed by other third parties, commercial crime insurance can provide the protection your business needs from crime-related losses.
Example:
- Security footage at your auto repair shop shows an employee of yours stealing car parts and electronics from your business’s storage room. Commercial crime insurance would cover the losses.
Workers’ compensation insurance provides financial and medical coverage for employees who are injured or fall ill on the job. Mandated in almost every state, workers’ comp can provide funds for medical expenses, lost income, and physical therapy for an injured employee who is recovering and unable to work.
Example:
- An employee at your car wash gets his foot stuck in a car door as he is wiping down the windshield of a customer car. He injures his ankle and is unable to work for a few weeks while recovering. Workers’ comp covers a portion of the employee’s lost income and his medical expenses while he is out.
Additional Insurance Coverage
- Cyber liability insurance cover your business against liability and property losses caused by cyberattacks such as hacks, data breaches, denial of service attacks, and viruses. This protection may be beneficial for auto dealers or repair shops that store customer information such as bank account or credit card information.
- Employment practices liability insurance (EPLI) provides financial protection for your business against lawsuits by current, past, or prospective employees accusing your business of wrongful treatment such as discrimination, harassment, or other employment-related issues.
- Inland marine insurance is a type of property insurance that provides coverage for goods, tools, equipment, and other property that is not tied to a fixed location and isn’t covered by a standard commercial property policy. This coverage may be particularly important for those auto businesses that transport high-value property, like cars or auto equipment, to customers or between properties.
- A business owners’ policy (BOP) combines general liability, commercial property, business interruption, and extra expense coverage into a convenient package for qualified small businesses. BOPs can be a good option for smaller businesses, providing them with a wide range of coverage at a lower cost.
Insurance Coverage for Your Employees
Along with making sure that your business is financially covered, it’s wise to also ensure that you’re providing your employees with adequate insurance coverage. Not only can sponsored group insurance coverage provide your team with a financial safety net, but it can also help your company attract talent and retain employees.
Group health insurance helps your employees pay for medical and healthcare expenditures, including everything from primary care to hospitalizations and surgeries. Offering health insurance to your employees can keep your employees in better health, which is important in physically demanding jobs. In addition, health coverage is increasingly an important factor in employment decisions, and many workers are looking for businesses that will provide them with comprehensive coverage.
Group life insurance provides a financial payment to an employee’s family or other survivors if the employee unexpectedly dies. The death does not have to be work-related. Although individuals can purchase life insurance on their own, as an employer-sponsored group, you can usually obtain better rates than an employee could get on their own.
Group disability insurance provides income to employees who cannot work as a result of non-work-related injuries.
What automotive service businesses need insurance?
Every automotive service business could benefit from comprehensive insurance coverage, as the liabilities are high in this industry. From the expensive property that you may be servicing or in the process of selling to the dangerous equipment and chemicals you may be working with, auto service businesses face a variety of risks. With the right set of insurance policies, you’ll be better positioned to protect the safety and financial viability of your business.
If your auto service business meets any of the following criteria, you should consider investing in business insurance coverage:
- You own or lease commercial property
- You own or lease vehicles for business purposes
- Members of the public visit your business property
- You sell products or professional services to customers
- You own or store valuable property, including vehicles, computers, and auto equipment
- Customers temporarily leave their vehicles in your care
- You store sensitive data on employees or customers
- You employ others
Commercial insurance can cover a wide variety of automotive services businesses. Some common businesses and professions that need insurance include:
Choosing an Insurance Company
The first step in acquiring insurance for your auto service business is finding the right insurance company to partner with. Below, we’ve highlighted a few of our trusted insurance partners, who offer a variety of coverage suitable for auto service businesses. We’ve also included a few factors that are important for your business to consider when evaluating insurers.
| Provider | General Liability | Professional Liability | Business Owner's Policy |
|---|---|---|---|
| Embroker | ?? | ?? | ?? |
| CoverageSmith | ?? | ?? | ?? |
| CoverWallet | ?? | ?? | ?? |
| Hiscox | ?? | ?? | ?? |
| Thimble | ?? | ?? | ?? |
Financial strength. While you may think getting the best-priced policy should be your main goal, it is more important to ensure you purchase insurance from a financially stable provider. It’s worth remembering that insurance claims are paid directly from the finances available to the insurance company. In other words, if the insurance provider is financially stable, they will be able to fulfill their claims commitment. When an insurance company does not have financial stability, it may collapse and be unable to support you.
While this is rare, it does happen. You want to know your company is always secure and certainly don’t want the surprise of finding out your insurance provider cannot cover your losses when you make a claim.
Of course, this leads to the obvious question: How do you know your insurance company has financial strength? Unfortunately, it is not as simple as just purchasing a policy from the biggest industry names because even giant insurers go through periods of financial instability. Luckily, there are rating agencies that grade insurance companies in terms of their financial strength. Some of the major rating agencies are Fitch, Standard & Poor’s, AM Best, and Moody’s.
Price. Cost is important for any business, but the price of insurance is not the only factor. Instead, your auto service business will be better served by looking for the policy that is the most affordable but also meets all your requirements.
Different insurers have different methods for determining the premium you will pay, although there are some industry standards. For insurance companies, pricing is all about determining how much risk your business presents. The key to finding the best deal that meets your company’s needs is to shop around. Speak to insurers, use online quote engines, and work with brokers to ensure you get the coverage you require to protect your business.
Customer service. While you want your insurance provider to be financially stable and priced competitively, it is also important that you can engage with the company. It is possible you will need to make a claim, change policy details, or update personal information. In these cases, you want to deal with a company that has good customer care. While most major carriers have good customer service records, some spend more time and effort on ensuring their customers are taken care of. This may seem unimportant, but dealing with welcoming, qualified, and thoughtful professionals will be vital during a claims process.
Final Word
Automobile service providers face a number of risks in their day-to-day operations. From a customer suffering a slip-and-fall incident on your business property to an employee injuring themselves while working on a customer car—accidents can happen at any moment. In order to make sure your business, employees, and customers are protected, invest in a comprehensive business insurance plan that can provide financial and medical support in your time of need.
