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What Is the Difference Between Garage Insurance and General Liability?

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What Is the Difference Between Garage Insurance and General Liability?

All businesses need liability insurance, but some specific industries may require specific insurance policies. While many small businesses can benefit from a general liability insurance policy, car garages, mechanics, and other businesses in the auto industry may benefit more from garage insurance. But what’s the difference between garage liability and general liability?

What Is the Difference Between Garage Insurance and General Liability?

General liability is a multipurpose policy that protects small businesses from a variety of common risk areas. Most business owners take out a general liability insurance policy to protect the business from lawsuits related to injuries, damage to client property, and accusations of false advertising. In general, having general liability insurance is a standard requirement for most businesses.

Garage liability is different. For garage insurance, the components of the policy are specific to the automotive industry. Garage liability insurance provides coverage for claims related to injuries and property damage to vehicles related to garage operations or services. With this insurance, garage owners will have coverage for any unexpected costs that may arise as a result of their business operations.

Keys of General Liability

General liability insurance will cover four types of liability risks. Product liability is the physical or property damage that may be caused by a product or service, bodily injury refers to a third-party injury sustained as a result of business operations, tenant liability is any damage to the property occupied by your business, and advertising injury related to false advertising or defamation claims.

With general liability, coverage in these four risk areas will save you from expensive legal fees and help your business recover more quickly if any claims are made against you. Without general liability insurance, it’s very difficult for a small business to recover from these types of claims.

Keys of Garage Liability

Although many of the features of garage liability may appear similar to general liability, the nuance of the policy details is where you will find the key differences between these two policies. Garage liability also covers four specific areas, including:

Third-Party Injuries

Third-party injuries refer to people who are injured as a result of your business operations. This does not include your employees, who should be covered by a different type of insurance policy. If a customer or other person not related to your business is injured at your garage, then you will need insurance to cover any fees related to their treatment.

For example, if a customer slips on oil or is otherwise injured while in your garage, then you are responsible for ensuring they have proper treatment for their injury. Failure to pay for hospital fees, surgery fees, or physical therapy rehabilitation fees could make you legally liable. Your insurance policy will cover the cost so you can avoid financial pitfalls.

Third-Party Property Damage

Garages tend to deal exclusively with third-party property – any time an automobile is brought into a garage, the small business becomes responsible for the treatment of the property. If a car is damaged because of employee negligence or as part of business operations, then the garage is responsible for paying for that damage.

The most common example of third-party property damage at a garage is scratching or dinging a vehicle, either while moving the vehicle to another area of the garage or as a result of tools harming the vehicle during repairs. If a client’s car is damaged while in the care of a garage, then the client has grounds to claim damages. This part of garage liability will cover the cost of any necessary repairs.

Product Liability

The items sold at a garage are typically repairs items for vehicles, which means all products sold by your business must be in good quality. Selling products that are not of good quality can potentially hurt the normal operation of a vehicle, particularly if the part is known to be faulty.

Selling defective automobile parts (even unintentionally) or using parts for repairs that are not appropriate for a specific car can create costly damages. This insurance will help you cover the costs of any repairs and protect you from legal fees from a lawsuit or other claim.

Liability Claims

Just like any other business, your garage is also vulnerable to liability claims. Liability claims in this policy may also be related to employees. Sometimes, liability claims include accusations from clients who claim they have been treated unfairly, such as with discrimination or dishonesty about the cost of repairs. Protection from liability claims will help you settle any damages if your business is found liable.

What Businesses Require Garage Liability?

Garage liability is a tailored insurance, which means it’s most appropriate for businesses in the automotive industry. While repair garages are likely the most common business to use this type of insurance, there are other automotive businesses that would also benefit from using this type of policy. Some examples include:

  • Dealerships
  • Auto body customization and paint shops
  • Detailing and car cleaning
  • Auto glass installers
  • Electronic repair
  • Emission test shops
  • Impound lots
  • Restoration shops
  • Parking garages and lots
  • Tow truck operators
  • Tire shops
  • Service stations
  • Valet services

Essentially, any time a business or employee will handle the third-party automotive property of a client, this specific insurance policy is good to have for overall coverage. Even if any employee will only be handling a vehicle for a short time, this coverage is necessary since car repairs can be very expensive.

What Is Garage Keepers Insurance?

Although garage insurance and garage keepers insurance seem like similar policies, it’s important to understand the distinction between these two policies. Garage keepers insurance is a policy specifically for businesses that take temporary custody or care of a vehicle, which is not something all automotive-related businesses will do.

With garage keepers insurance policies, the details of the policy specifically cover property damage related to accidental collision damage, fire, extreme weather, vandalism, or theft. If a client leaves their vehicle in the custody of your business, then you are responsible for ensuring that vehicle is returned to them in good order. Without this insurance, you may be on the hook for paying the full cost for replacement and repairs.

Do You Need Both Garage Liability and Garage Keepers Insurance?

This depends entirely on your business operations. Some businesses may not need to have this type of insurance, such as service stations, dealerships, or certain repair shops. But other businesses may have an overlap in business operations that will require the business to have temporary custody of a vehicle to complete certain repairs.

For example, if a repair will take several days, then when the owner of a vehicle hands over their keys, your business takes temporary custody of the vehicle until the repair is complete. If any damage is sustained to the vehicle not related to normal business operations, then you will need garage keepers insurance to cover the damages. An insurance expert will be able to advise whether or not you need both policies.

Do You Need Both Garage Liability and General Liability?

In some cases, you may only need garage liability to cover your business operations. However, there are some automotive businesses with enough crossover that it may be necessary to have both types of insurance policies. For example, car dealerships that have on-site service centers may benefit from having both insurances since garage liability would not necessarily cover claims made on the car-selling portion of the business. Again, an insurance expert can advise the ideal insurance policy or combination of policies that are best for your business.

What Does Garage Insurance Not Cover?

Generally speaking, while garage liability insurance covers third-party claims against your business, it will not provide the same protection for your business or your employees. For example, garage liability does not cover damages related to your business building, tools used for business operations, other business property, employee injury, or other personal damages.

To cover these types of damages, you will need additional insurance policies. Some common policies include employment practice or professional liability coverage, worker’s compensation, and other business owner’s insurance. The insurance policies you choose should be selected based on your specific business needs.

Why Do You Need Insurance for Your Business?

The most obvious reason to secure a good insurance policy for your business is to avoid expensive financial compensation for any claims made against your business or your employees. Recovering from third-party personal or property damage can be expensive, particularly for small businesses. But in addition to this, you may need the correct insurance for your business to comply with local state or federal regulations to run your business.

Businesses in the automotive industry generally require different types of coverage than other businesses. Because automotive businesses handle third-party property to complete automotive repairs, it’s necessary to have a comprehensive garage insurance policy to provide coverage for any liability claims. Some automotive businesses may even require a combination of different insurance policies. For more information about garage insurance for your business, contact ISU Armac Insurance Services.