Garage Liability Insurance: What it is, How it Works

Julia Kagan is a financial/consumer journalist and former senior editor, personal finance, of Investopedia.

David Kindness is a Certified Public Accountant (CPA) and an expert in the fields of financial accounting, corporate and individual tax planning and preparation, and investing and retirement planning. David has helped thousands of clients improve their accounting and financial systems, create budgets, and minimize their taxes.

What Is Garage Liability Insurance?

Garage liability insurance is specialty insurance targeted to the automotive industry. Automobile dealerships, parking lots or parking garages operators, tow-truck operators, service stations, and customization and repair shops will add garage liability insurance to their business liability coverage. The policy protects property damage and bodily injury resulting from operations.

This insurance is not the same thing as garage-keepers coverage.

How Garage Liability Insurance Works

​​​​​​​Garage liability insurance is a type of umbrella policy that provides coverage for the day-to-day operations of the businesses in the automotive industry. This insurance will add a layer of protection to the business' general liability policy. Coverage includes bodily injury and property damage from direct garage operations, not covered under most commercial or business liability insurance.

Before buying a policy, the business owner should verify that the garage liability coverage will add to, and not merely replace, their basic business liability coverage.

Coverage will include injuries to customers while on the business grounds up to the chosen limits of the policy. Also, most garage insurance will consist of an employee dishonesty provision for theft or vandalism done by an employee of a customer's car. For an added premium, any autos used in the conducting of business, such as courtesy vans and parts delivery trucks, may be added. Additional protections can include damages from parts or products sold by the company and coverage for loss from faulty parts installed on a client's vehicle.

Garage liability insurance will not cover the tools, building, personal, or business property of the policyholder. It does not provide coverage for vandalism, stolen vehicles, or damage from events such as hail. The policy does not cover accidents or damage to the customer's cars on-site for service. Also, all policy basic and additional items will have a listed maximum liability coverage amount and may have aggregate limits by claim or by year.

Commercial general liability (CGL) insurance policies have varying levels of coverage. This insurance may include coverage for the premises, which protects the business from claims on location during regular business operations. It may also include coverage for bodily injury and property damage resulting from finished products.

Garage Liability Is Not Garage-Keeper Coverage

Garage-keepers insurance is a separate policy that covers the property damage to a client's car while it is in the care of the policyholder. This can include damage during road test drives and while storing the vehicle during non-working hours. The keeper's insurance will cover vandalism and theft of a customer's car. Businesses with multiple locations require policies for each site.

Other Business Insurance Products

Businesses may purchase coverage for other business risks as well.

• Employment practices liability insurance covers claims associated with sexual harassment and discrimination.
• Professional liability coverage insures against negligence claims that result from mistakes or failure to perform.
• Property insurance covers equipment, signage, inventory, and furniture in the event of a fire, storm, or theft. However, additional coverage is needed to cover events such as floods or earthquakes.
• Business interruption insurance compensates for lost income during events that prevent normal business operations, such as an extended power outage.
• Workers' compensation insurance is mandatory for employers to protect employees and to cover an injured employee’s medical care. It also provides lost wages and death benefits to a deceased worker’s immediate family.
• A company may name other companies or individuals as additional insured under its commercial liability insurance policy. For example, if an automobile repair garage enters into a contract with another company to provide car washing services, that company may require the garage owners to add it as additional insured on their garage liability coverage.