Jeffrey Wade
Running an auto repair shop comes with unique challenges and risks. A single accident can lead to a lawsuit that can harm the financial health of the business. Therefore, it is crucial for auto repair shops to have comprehensive insurance policies in place to safeguard their business. Auto repair shops need to consider various types of insurance to protect themselves from common risks such as theft, lawsuits, and damage caused by work-related accidents. This includes worker's compensation, garage keeper's insurance, general liability insurance, commercial property insurance, loss of income insurance, and commercial auto insurance. By investing in quality insurance, auto repair shops can have peace of mind and focus on running their business smoothly.
| Characteristics | Values |
|---|---|
| Type of insurance | Garage Liability Insurance |
| General Liability Insurance | |
| Commercial Property Insurance | |
| Business Interruption Insurance | |
| Worker’s Compensation Insurance | |
| Business Property Insurance | |
| Property and Equipment Insurance | |
| Loss of Income Insurance | |
| Commercial Auto Insurance |
What You'll Learn
Garage Liability Insurance
It is important to note that Garage Liability Insurance does not cover the policyholder's tools, building, personal, or business property. It also does not cover accidents or damage to customer vehicles on-site for service, vandalism, stolen vehicles, or damage from events such as hail.
Before purchasing a Garage Liability Insurance policy, a business owner should ensure that the coverage will add to, and not replace, their basic business liability coverage. It is also important to understand the specific coverage, limitations, and premium costs of the policy.
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Business Auto Insurance
Additionally, business auto insurance can provide protection if an employee is involved in an accident while driving a personal vehicle for work-related tasks. This is known as hired and non-owned auto insurance (HNOA), which covers accidents in personal, leased, or rented vehicles used for work. However, it is important to note that HNOA does not cover damage to the vehicle used by the business.
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Worker's Compensation
Workers' compensation insurance is a vital consideration for small auto repair shops. This type of insurance is required by law in most states and is designed to protect employees in the event of work-related injuries and illnesses. It covers medical costs and lost wages, which can be financially devastating for small businesses without this protection.
Workers' compensation insurance for auto repair shops typically includes employer's liability insurance, which offers protection if an employee sues the business owner over an injury. This type of insurance can also help cover the costs of legal defence, even if the lawsuit is frivolous. It's important to note that employer's liability insurance has limits on how much it will pay out for a lawsuit.
The cost of workers' compensation insurance is based on the business's payroll, with each employee grouped into classification codes based on their job duties. The rate is calculated per $100 of payroll, and it's essential to properly classify workers to avoid overpaying for coverage. The National Council on Compensation Insurance (NCCI) uses nearly 800 class codes to help insurance companies categorise employees for rating purposes.
For example, Class Code 8380 (Automotive Repair) applies to service stations, gas stations, and specialty shops that perform a range of repair services. This code also includes employees of new and used auto dealers, such as mechanics, parts specialists, and service writers. On the other hand, Class Code 8933 (Auto Body Repair Shop) is specific to businesses engaged in the body repair of automobiles using metal, fiberglass, and plastics. This classification includes upholstering, painting, and dent repair.
When choosing a workers' compensation insurance policy, small auto repair shops should consider the specific needs of their business and ensure they are properly covered. Working with an experienced insurance agent can help business owners navigate the complexities of this process and find the best coverage for their unique situation.
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Commercial Property Insurance
Business property insurance also covers office supplies, missing inventory, and other risks. You can amend this insurance to provide business interruption coverage, which would compensate for employee wages, leases, and additional costs incurred when the company was temporarily shut down. This is also known as loss of income insurance.
Additionally, you may want to consider property and equipment insurance, which covers your auto shop in the event of power surges, mechanical breakdowns, burned-out motors, or employee accidents that cause equipment failure.
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Loss of Income Insurance
Small auto repair shops can benefit from loss of income insurance in the event of unforeseen circumstances that impact their ability to operate and generate revenue. For example, if an auto repair shop is forced to close temporarily due to a natural disaster, such as a fire or flood, loss of income insurance can help cover specific continuing expenses, including payroll, taxes, or mortgage payments. This type of insurance can also assist with relocation or advertising fees if the business needs to move to a temporary or new location.
Additionally, loss of income insurance can provide coverage for utility services. If an auto repair shop loses water, gas, or electric utilities due to a natural disaster or emergency, the insurance can reimburse lost income during the period when the business was without these essential services.
Extra expense coverage is another aspect of loss of income insurance. This coverage is particularly relevant for businesses that operate constantly or cannot afford to shut down, even in an emergency. For instance, if an auto repair shop needs to temporarily relocate to a new location with higher rental costs or incur additional expenses to maintain operations, extra expense coverage can help mitigate these unexpected costs.
Civil authority coverage is a crucial consideration for auto repair shops located in areas prone to natural disasters. This coverage provides income if the business is forced to close due to an evacuation order or disaster, such as a wildfire or hurricane.
When choosing loss of income insurance, auto repair shops should also consider dependent property coverage. This type of coverage is designed for businesses that rely on other companies to supply them with goods and services. If a supplier ceases operations, the auto repair shop may suffer financial losses, but dependent property coverage can compensate for these losses. This coverage also extends to situations where customers have paid for services but cannot receive them due to unforeseen circumstances.
In summary, loss of income insurance is a vital consideration for small auto repair shops to ensure their financial stability during unexpected events. It provides coverage for various expenses, including payroll, taxes, mortgage payments, relocation fees, and lost income due to utility disruptions or supplier issues. By having this insurance in place, auto repair shops can focus on their operations and customer service, knowing that they have a safety net in case of unforeseen disruptions.
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Frequently asked questions
Garage insurance, also known as auto service and repair insurance, is a type of insurance that protects against liabilities faced by garage owners, such as customer injuries or damages to vehicles. Any business with a physical location, such as a garage or parking lot, that is used to repair or store vehicles will typically need garage insurance.
Regardless of their specialty, auto repair shops need general liability insurance, errors and omissions insurance, and commercial property insurance. If the shop has employees, worker's compensation insurance and cyber liability insurance are also necessary.
The cost of auto repair shop insurance varies depending on factors such as the types of repair services offered, the location of the business, the amount and value of equipment, and whether the shop has any certifications. On average, a small auto repair shop in the US pays between $39 and $89 per month for insurance.
