When you operate a business that deals with cars, customers expect their vehicles to remain safe while in your care. However, no matter how careful you are, there’s always a possibility that an accident will occur—and your company could be held liable. Garagekeepers Insurance provides financial protection in the event that a customer’s vehicle is damaged or destroyed while it is being kept at your business location. 

What is Garagekeepers Insurance?

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: 

• You run an auto repair shop. Lightning strikes the building, causing a fire that damages several cars that have been kept in the garage overnight while repairs are being completed. Garagekeepers Insurance would cover the loss to your customers’ cars. 

What is the difference between garage liability and Garagekeepers Insurance?

Garage liability insurance provides coverage for accidental third-party bodily injury and property damage resulting from your garage operations. However, vehicles that are under your business’s care, custody, or control—which would include customer vehicles—are specifically excluded from garage liability coverage. Garagekeepers Insurance addresses this exclusion and provides coverage for customer vehicles under your business’s care.

Who needs Garagekeepers Insurance?

Garagekeepers Insurance is critical for businesses that work with customers’ cars, including auto repair shops, service stations, towing services, car dealerships, car washes, and businesses that offer valet parking services, among others. Other insurance policies such as commercial property insurance or general liability insurance typically do not cover vehicles belonging to others that are in your care, custody, or control. Companies that don’t purchase Garagekeepers Insurance would be left to pay the cost of any losses out of pocket. 

Example: 

• While moving a customer’s car into a repair bay, your employee accidentally backs into a concrete pillar, damaging the car’s rear axle. Garagekeepers Insurance would cover the damages to the customer’s vehicle.

What does Garagekeepers Insurance cover?

Garagekeepers Insurance provides coverage for losses to a customer’s auto or auto equipment left in your business’s care for service, repair, storage, or safekeeping. Coverage applies to motor vehicles, trailers, or semitrailers. 

Garagekeepers Insurance, similar to auto physical damage coverage, offers three coverage options:

• Collision coverage pays for physical and mechanical damage to a customer’s vehicle if it hits or is hit by an object or another vehicle or is overturned.
• Comprehensive coverage provides coverage for all causes of loss not covered by collision coverage. 
• Specified causes of loss coverage is a more limited form of comprehensive coverage, providing coverage only for the causes of loss defined in the contract. Specified cause of loss typically includes fire, lightning, explosion, theft, mischief, and vandalism.

Example: 

• Someone breaks into your car service shop and steals car parts from a number of customer vehicles. Your Garagekeepers Insurance would cover the loss. 

Legal Liability vs. Direct Coverage

Garagekeepers Insurance is most commonly written on a legal liability basis, which means it covers loss or damage to customer vehicles when your company is at fault, such as if one of your employees accidentally drives into another vehicle or object while moving a customer car. In these cases, your company would be considered legally liable and Garagekeepers Insurance will cover the full claim up to your limits of insurance.

However, some causes of loss are outside of your business’s control—for example, a hail storm or lightning strike. Your business would not be considered liable for these perils, and your customers’ own comprehensive auto insurance may provide coverage. 

Garagekeepers Insurance can also include a direct coverage option, which covers claims for which your business is not liable. There are two forms of direct coverage available in Garagekeepers Insurance: direct primary coverage and excess coverage. 

• Direct primary coverage will cover a loss up to the limits of insurance, even if the business is not legally liable for it. Your insurance policy would be the primary insurance in this case. 
• Excess coverage will provide coverage after the customer’s own insurance reaches its limits. In this case, your insurance policy only provides excess coverage over the customer’s applicable policy. It will also pay for losses of customers who do not have comprehensive auto insurance. 

Because direct primary coverage offers a greater level of coverage, premiums are generally more expensive for this type of policy, while excess coverage is typically more affordable. Covering customers’ losses can increase their positive opinion of your business in the event of a disaster. 

What are the key exclusions of Garagekeepers Insurance?

Common exclusions from Garagekeepers Insurance coverage include: 

• Contractual obligations in which your business accepts liability for losses
• Theft by you or your employees
• Damage caused by defective parts or materials or faulty work you performed 
• Loss of stereo  or radio equipment that is not permanently installed
• Radar or laser detection equipment or jamming devices
• Damage caused by war  

Although standard Garagekeepers Insurance policies do not typically cover the contents of customers’ vehicles or non-permanent stereo equipment, many insurers will allow you to add an endorsement to cover customers’ personal property. Offering this coverage can help you keep the good opinion of your customers if items are stolen from their cars while they are in your possession. 

What are the limits of Garagekeepers Insurance?

You can select the limits of your policy with your insurer. When choosing the limits of your policy, it’s important to consider the average value of the vehicles in your care as well as how many vehicles you typically have in your custody. This will help you select an adequate limit of insurance.

Example:

• The average value of your customers’ vehicles is $20,000, and you typically have 10 vehicles on your premises. Multiplying the value of the vehicles by the number of vehicles, you can determine that your limit of insurance should be $200,000.

Does Garagekeepers Insurance have a deductible?

Garagekeepers Insurance typically includes a deductible, which is the amount of each claim that your company is responsible for paying before insurance coverage begins. Policies with lower deductibles will have higher premiums. Deductibles for Garagekeepers Insurance policies can vary slightly depending on the type of loss. The collision portion of coverage usually includes a deductible for each affected vehicle, while comprehensive or specified causes of loss coverage may have two deductibles—one for each vehicle and one for the entire incident. 

Final Word

If your business takes possession of customers’ vehicles, you could be held liable for any losses or damage that occurs. The expenses of reimbursing customers for damaged vehicles can be extreme, especially if multiple vehicles are affected. Since property or general liability insurance will not cover damage to others’ vehicles in your care, Garagekeepers Insurance is an important coverage that can provide crucial financial protection if vehicles in your care are lost or damaged.