Determining the Right Coverage for Auto Related/Garage Businesses in a Changing Environment

Are you trying to determine the right coverage for a client’s garage business? First, it’s important to know the difference between Garage Liability and Garagekeepers Liability coverage to determine the type(s) of coverage your client needs. But there are other factors to keep in mind when considering coverage for an auto repair business.

Garage Liability insurance is a combination of General Liability and Auto Liability. It protects against Premises Liability and Operations, Auto Liability, BI/PD claims caused by accidents during test drives, and third-party bodily injury/property damage as a result of a botched repair. Garage Liability alone will not protect the insured from comprehensive and collision losses on customers’ autos while in the insured’s care, custody, and control. 

Garagekeepers Liability provides coverage that’s above and beyond a standard Garage Liability policy. It covers the exposures from physical damage losses on customers’ autos, such as fire damage; as well as collision losses while employees are test-driving the customers’ vehicles.

Many auto repair businesses are conflicted about whether to get Garage Liability or Garagekeepers Coverage when often, they need both.

In addition to the Garage Liability vs. Garagekeepers conundrum, insurance agents also need to factor in a changing environment when determining coverage for their clients. For instance, many auto repair businesses are facing increased exposure, with more vehicles onsite than ever before, which must be addressed. These businesses should cover all non-owned vehicles on their lot. If there’s ever a fire on the property and the whole lot is destroyed, they need coverage for all the damaged vehicles on-premises.

Even if an auto repair shop has the same average number of vehicles at their shop as before, their exposure may now be higher because the values of these autos have gone up. Inflation has raised prices significantly over the past year, and the car market has experienced some of the biggest increases. Prices for used cars and trucks have increased a whopping 31% over the last year. Agents need to educate their clients, saying, “Is this $100,000 Garagekeepers limit going to be adequate now, with the vehicle values being so much higher?”

Another important factor in the equation is that we’re seeing an uptick in secondary perils, such as wildfires, tornadoes, hail, and severe thunderstorms. These weather events are becoming more impactful, catastrophic, and damaging; generating tremendous losses. Events like the fires in California and Colorado have been very costly, and these devastating events are becoming a more frequent threat. It’s a perfect storm – literally and figuratively – as insurers may see higher losses due to extreme weather events plus inflation that’s increasing the value of exposed property. It is important to know what type of Garagekeepers Coverage is available and on the policy. Is it Legal Liability or Direct Primary? Garagekeepers Legal Liability will cover only the losses that the insured is legally liable for. Many garage insurance carriers do not offer Direct Primary coverage unless all autos are stored inside a locked/alarmed building, or the carrier may exclude wind/hail/flood, fire or theft coverage in high-risk areas.

Insurance applications for garage businesses have become quite comprehensive – sometimes as long as five or six pages, plus a special vehicle type supplement – which insureds can find overwhelming. It’s essential for your clients to fill out the application in its entirety because their answers will allow underwriters to qualify their risk and find the right fit. Carriers need to know details about the business – what types of autos the company works on, the number of autos on their premises, lot security, how many people work for the shop (payroll), etc. – to present them with an accurate quote that will provide the best coverage to meet their needs.

Jencap specializes in transportation and garage risks. Our talented brokers will find your clients the right carrier partner and coverage package for their auto businesses. We stay ahead of the curve on every industry trend and know-how the changing environment is impacting coverage needs. For more information, contact us.

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