6 Types of Insurance for Auto Repair Shops

As an independent auto repair business, you may have dealt with an insurance company—either your own or a customer’s after they got into an unexpected accident.

But what’s the importance of insurance, and how does it impact you—the auto repair shop owner? Let’s find out whether you should invest in insurance.

Why is insurance necessary for an auto repair business?

There are several reasons to get business insurance for your auto repair shop. It protects your finances against common risks such as theft, lawsuits, and other damage that may occur due to work-related accidents.

Vehicle repair itself can be tricky, and cars can be unpredictable depending on customers’ driving habits, model of vehicle, modern technology such as ADAS, and other factors that can cause them to break unexpectedly. Investing in quality insurance frees you from worrying about large unexpected costs from break-ins, damage due to natural disasters, accidents, and others.

What are the 6 most important types of auto repair shop insurance?

Here are some types of mechanic shop insurance your auto business needs:

1. Worker’s compensation

When working with heavy equipment and cars, there’s always a potential risk of employee injury. Even a momentary lapse of concentration can be catastrophic.

The US Bureau of Labor Statistics reported 9,460 non-fatal accidents and 60 deaths in 2019 in the auto repair sector. With worker’s compensation insurance, you can avoid the liability of paying expensive medical bills for employees injured on the job.

2. Garage keeper’s insurance

This is the policy all garage owners should invest in since it protects them from bearing expenses if customers’ personal vehicles get damaged in the shop’s parking bay. Motorized vehicles can be unpredictable at times. This means that a perfectly functional car may develop electrical problems, causing it to catch fire.

Avoiding such situations can be tricky, so it’s a good idea to inspect all cars when they come into your shop for every minor and major vehicle repair job. This helps you identify any potential faults. However, auto repair business owners should go the extra mile and ensure the keys to every car are locked away when they aren’t needed to reduce the chances of theft and vehicle damage claims.

Without garage keeper’s insurance, you are liable to bear expenses to replace any vehicle component that your employees damaged.

3. General liability insurance

Suppose a customer slips while walking into your shop and tries to sue your business for it. Here are some ways to make your shop safe for customers:

  • Avoid leaving out grease or oil on the floor.
  • Cordon off high-risk areas from customers.
  • Fix any cracks in the floor or walls that could lead to customer injuries.

Address any potential hazards based on customer complaints since they may notice things you won’t. But, even after taking all precautions, accidents can happen.

With all the equipment and vehicles in repair shops, customer injuries may be more serious than those incurred at a coffee shop. One way that you can make your business safer for everyone is by optimizing your shop’s layout. General liability insurance helps you settle cases that may arise during daily business operations.

4. Commercial property insurance

As an auto repair shop owner, the thought of losing your garage to an accident or a natural disaster is unsettling. Getting commercial property insurance may be a good idea since it protects all covered assets from loss.

5. Loss of income insurance

In times of disaster, you may be unable to continue doing business. Yet your rent and other expenses will keep piling up while you’re unable to work on any cars. To avoid racking up liabilities and incurring losses, invest in business income insurance.

6. Commercial auto insurance

After working on a car, your technicians may have to road-test them to ensure that the issue is resolved. It’s important to understand that employee test drives come with risks of things falling apart and the possibility of collisions. If things do go wrong, commercial auto insurance can protect you and your business from bearing the expenses to fix damaged vehicle components.

How much can you expect to spend?

The added liability protection might be tempting for most mechanics. Insurance cost, while it might be steep for small business owners, is worth the investment.

There are many companies offering different insurance plans with protection and rates that fit your shop’s needs. On average, a small auto repair shop pays a monthly sum of between $39 and $89 for insurance in the US; however, costs may vary depending on several factors.

Coverage cost varies by state—while some states don’t have mandatory requirements, California requires every auto repair business to cover some sort of insurance as part of the consumer protection law.

Here are some of the main factors that affect your auto repair shop insurance cost:

Type of coverage

If you’re a small business owner, you may get away with getting the lowest-tier auto repair shop insurance. However, as you grow your auto repair business and more customers find their way to your shop, customer complaints are likely to increase, as do the chances of them suing you. For larger shops, a more comprehensive policy is recommended.

Insurance rates

While a reputable insurance company may seem more expensive than an unknown one, it’s also the safer bet. As a business owner, many independent insurance agents will approach you. It’s always a good idea to get multiple quotes from different vendors rather than accept the first cheapest estimate you find. There’s often room to bring down the initial estimate quote, so don’t be scared to bargain a little!

History of claims

If you’ve kept your business relatively out of trouble and don’t have too many past insurance claims, you may secure a good deal on insurance for your auto repair shop. Business insurance has a higher premium depending on how much risk factor is associated with your profile.

If, after conducting a risk assessment, the insurance company determines that they’ll have to give you frequent payouts, your premium will increase for the same insurance policy.

Total assets insured

Your business insurance premium changes based on how many assets you have covered under the policy. The more assets there are, the greater the sum you’ll have to pay.

It may be fun acquiring more repair shops in your region, but it significantly drives up your insurance expenses.

Potential risk exposure for employees

Shops with more employees that work with heavy equipment will find themselves paying more to their insurance company since there’s a greater chance of injuries and payouts to technicians injured on the job. In shops where techs are often working on cars’ chassis or using grinders can drive up your mechanic’s insurance cost.

Choosing the right business insurance for your auto repair shop

Each auto repair business is different, but thankfully there are multiple solutions available. While it may take a while, finding the right insurance policy for your shop gives you the same peace of mind as implementing the auto repair software that meets your needs.

Your auto repair shop needs six types of insurance coverage, including: 

  1. Worker’s compensation 
  2. Garage keeper’s insurance 
  3. General liability insurance 
  4. Commercial property insurance 
  5. Loss of income insurance 
  6. Commercial auto insurance

Your auto repair insurance provides specific coverage depending on the driving incident. Liability coverage applies to damage you cause with your vehicle. Collision coverage will provide coverage for an accident involving your vehicle. 

Auto Repair Shop Management Software

AutoLeap is a powerful all-in-one auto repair shop software that helps to keep complete track of your business – from scheduling appointments to managing technicians and generating invoices.

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