When you own or plan to own a car dealership, there are numerous liabilities to consider. Dealing with valuable property and tools, plus other people’s assets, means there are high-stake risks to protect yourself from. There are several types of insurance you’ll need to consider and purchase, including garage liability insurance. If you are considering opening a car dealership and researching your insurance needs, you might be wondering, “What’s garage liability insurance?” In this article, we will break down what it is, who it’s for, and what it does and does not cover. 

Garage Liability Insurance Explained 

Garage liability insurance is a specific form of insurance that can protect car dealers and other business owners in the automotive industry if injuries or property damage occur from the services provided. It can cover any costs associated with medical needs, repairs, replacements, or legal fees that may result from services. Car dealers need to have this type of insurance because many of the accidents that can occur are not covered by normal, general liability policies.¹  

Just remember that garage liability insurance doesn’t cover any damage to a customer’s vehicle—for that, you’ll need a different type of insurance called a garage keepers’ liability policy.² Garage keepers’ insurance protects the customer’s vehicle while it is in your custody, so having both policies is typically essential.³ 

Who Needs Garage Liability Insurance? 

In addition to car dealers, many other types of small businesses within the automotive field will need to invest in garage liability insurance to protect their business from legal consequences. These businesses  include²: 

• Body shops 
• Repair shops
• Towing lots
• Garages 
• Oil change and service stations
• Emissions and inspection stations 
• Parking lots 

What Does Garage Liability Insurance Cover? 

As we mentioned previously, garage liability insurance doesn’t cover everything you need as a car dealer or auto business owner. But it does cover a number of general liability and garage-specific needs. Within the policy, the person named, plus their partners and employees will be covered in cases where the following happens²: 

• Property damage: Covers third party’s property that is harmed during services, such as a customer’s phone being damaged by a piece of equipment in the garage 
• Products: Includes any issues that result from the work and services completed, like a customer being injured by a replaced part 
• Auto service: Covers issues from work you haven’t completed yet, such as damage to a customer's vehicle while towing 
• Vendor: Extends the coverage to all vendors you work with 

What Doesn’t Garage Liability Insurance Cover? 

On the other hand, many risks aren’t covered by this type of insurance. Garage liability insurance won’t protect you and your dealership from¹: 

• Damage or theft of business property, like tools or vehicles operated by the business
• Employee injuries (this would be covered under workers’ compensation policies)
• Damage or loss to a customer's vehicle while in the business’ custody 

How to  Buy Garage Liability Insurance 

Purchasing your policy is not complicated—just contact an insurance broker to discuss the options that fit your business. Each policy varies in terms of what is included, so be sure you are clear on the fine print about your policy, especially if you want to include the auto service or vendor coverage we mentioned above. Plus, you will want to ask for a quote so you know exactly what you will be paying. 

This leads to the next frequently asked question: How much does garage liability insurance cost? The price will vary depending on your previous claims history, the plan and amount of coverage you choose, and what your business offers. The insurance agent will be able to detail all of this for you.¹ According to Car and Driver, the average policy in 2023 was $1,150–$2,300 per year,² but can vary based on the individual factors associated with your business. 

Partner With the Team at ACV Auctions

Our state-of-the-art online auto auction platform will help you take your car dealership to the next level. Each of the vehicles on our site has been inspected by a detail-oriented member of our team to ensure you understand what you are bidding on. Take the next step with your dealership to boost sales and drive customer loyalty with the best inventory out there. Register here to get started and learn more.  

Sources

1. Carpenter, Adam. 2023. “Garage Liability Insurance.” U.S. News & World Report. Retrieved January 10, 2024. https://www.usnews.com/insurance/glossary/garage-liability-insurance 
2. Glass, Steven. 2021. “Everything you need to know about garage liability insurance.” Car and Driver. Retrieved January 10, 2024. https://www.caranddriver.com/car-insurance/a36421471/garage-liability-insurance/ 
3. Insureon. “Garage liability insurance.” Insureon. Retrieved January 10, 2024. https://insureon.com/auto-services-business-insurance/garage-liability-insurance