Auto Repair Shop Insurance

Auto Repair Shop Insurance

Auto body repair shops offer a wide range of services. Your garage insurance policy needs to be customized to suit your business’s needs.

Canadian automotive businesses such as auto and collision repair shops, garages, dealerships, car washes and gas stations require a comprehensive liability insurance package to protect themselves from third-party bodily injury or property damage claims.

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What is auto repair shop insurance?

Auto repair shop insurance is a comprehensive commercial policy that insures car repair businesses, owners, and their employees against third-party claims of damages to your customers’ vehicles as well as protection for your company-owned vehicles.

Why is auto repair shop insurance important?

Your customers rely on you to repair, service and store their vehicles safely. The care, custody, and control of customer vehicles are your responsibility. If something goes wrong while a customer’s car, SUV, or truck is in your possession (accidents do happen), having customized insurance for an auto repair shop that adequately addresses any unforeseen circumstances is essential to protecting your business.

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What does it cover?

Every auto repair shop is different, and insurance requirements will vary by the services you provide. A comprehensive auto repair shop insurance policy typically includes these coverages:

  • Commercial General Liability (CGL) Insurance: CGL is a liability insurance policy for auto repair shops that protect you and your business against common claims you may run into, such as third-party property damage (damage to a customer’s vehicle) or bodily injuries (if a customer visiting your facility slips, falls, and is injured). Should your business be named in a lawsuit, CGL may cover a customer’s medical expenses and your legal fees regardless of the outcome. However, your CGL coverage limit applies to all employees of your business, not each employee. One option to accommodate all your employees is to increase your limit.
  • Garage Liability Insurance: Garage liability coverage contains special endorsements that covers vehicles in the care, custody, and control of your auto repair shop. It includes third-party liability coverage if your employees need to drive a customer’s vehicle while it is in your shop’s possession.
  • Commercial Property Insurance: Commercial property insurance protects your repair shop, as well as its contents (including your inventory) from insured risks that occur beyond your control, like a fire, theft, or flood. Carrying commercial property insurance gives you the option of getting business interruption coverage, which reimburses the net income lost following an insured event. It may also cover overhead costs, employee wages, and other costs associated with temporarily closing your business. However, business interruption coverage does not cover income lost due to a pandemic, infectious disease, or government-mandated closure.
  • Tools and Equipment Insurance: Your tools and equipment are likely your most important assets, making equipment and tools insurance critical. This policy provides coverage to replace, or repair lost or damaged equipment and tools, accessories, or others’ property in your care. Anything valued at less than $1,500 is considered a tool, whereas anything above is considered equipment.
  • Cyber Liability Insurance: Cyber liability insurance is one of the most critical coverages to have if you’re storing your customers’ data. While your customers will visit your auto repair shop, if you offer customers the opportunity to make a reservation online that requires them to include personal or financial information, it is your responsibility to protect their data. Cyber liability insurance covers costs associated with electronic incidents, such as cyber-attacks on your computing systems.
  • Pollution Liability Insurance: Auto repair shops do have an impact on the environment, and environmental liability is on the rise. Pollution liability insurance covers clean-up costs, third-party bodily injuries (such as a respiratory illness), or damage to a customer’s vehicle caused by pollution or toxic substances produced due to your work.
  • Professional Liability Insurance: Also known as errors and omissions (E&O) insurance, if your auto repair shop provides its customers with advice or consulting services, consider adding professional liability coverage to your policy to protect against claims alleging you gave incorrect information or failed to deliver a service as promised.
  • Commercial Crime Insurance: Commercial crime insurance protects against theft by employees, including any losses resulting from forgery or fraud. It can be purchased as a standalone policy, or it can be added to your existing commercial general liability policy. Commercial crime coverages include money and securities (for losses due to burglary, robbery, or theft) and employee dishonesty (for losses or liabilities resulting from fraudulent acts such as embezzlement).
  • Non-Owned Auto Insurance: Non-owned auto liability coverage protects your business if an employee uses their personal vehicle for work, such as picking up parts to deliver to your shop. It provides coverage for damage to another vehicle or property, and any third-party medical costs resulting from a car accident.
  • Garage Keepers Liability Insurance: Garage keepers coverage is designed to protect your customers’ vehicles stored on your premises and while you or your employees are doing maintenance work or servicing them. It covers the cost of damages or losses due to fire, theft, vandalism, or severe weather if your repair shop is held liable for damages to a customer’s vehicle.
  • Tenant Legal Liability Insurance: Tenant legal liability coverage insures any loss or damage to the property that you rent or occupy (but do not own) for your business.
  • Leased, Rented, Borrowed Equipment Insurance: This type of coverage accounts for loss or damage to any materials and equipment you use in your auto repair shop that you lease, rent, or borrow.

How much does auto repair shop insurance cost?

What the annual premium is for auto repair shop insurance depends on a variety of factors, including: 

  • The services your auto repair shop provides
  • Your years of experience as an auto repair shop owner
  • Where your shop is located and the size of the shop
  • Your annual and projected revenue
  • How many employees you have
  • The tools and equipment you have onsite
  • The contaminants your auto repair shop produces

You have the option to choose the level of coverage. Many auto repair shops carry at least $1 million of liability coverage. Speak to your broker to determine what the right level of coverage is for your business.

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Do other automotive businesses need liability coverage?

All automotive businesses need liability insurance to safeguard their operations from unforeseen circumstances and third-party bodily injury and property damage lawsuits, such as: 

  • Auto glass installers
  • Oil change shops
  • Muffler repair shops
  • Transmission repair shops
  • Tire and battery repair shops
  • Service or gas stations
  • Parking garages
  • Auto detailing or vehicle painting facilities
  • Auto dealerships

Common claims scenarios

Frequently asked questions

How much insurance do I need for my auto repair shop?

How much coverage your auto repair shop needs depends on several factors, including where your shop is located, the types of services you offer, how many employees you have, and what your annual and projected revenues are. It also depends on how many customers’ vehicles you have on your premises and the average value of each vehicle. Speak to a licensed broker to determine what level of coverage your auto repair shop needs.

Does my insurance policy cover my mechanics in training?

A comprehensive package featuring commercial general liability and E&O (errors and omissions) insurance may cover the costs associated with any errors your auto mechanics or technicians make to a customer’s vehicle that lead to a car accident. Your auto mechanics and technicians, whether they are being trained or are experienced employees, are covered by a commercial general liability policy.

Do I need additional coverage if my auto repair shop also sells used cars?

Provided your auto repair shop has a used car dealer licence as per your province’s regulations, you may require additional ‘used car dealer’ coverage to your commercial general liability policy to adequately protect the new or used vehicles in your possession. Whereas garage keepers liability insurance protects customer vehicles in your care, used car dealer coverage is designed to protect you against damages or loss such as theft and vandalism to vehicles you are selling. 

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