Business Insurance for Auto Body Shops

The most common and comprehensive type of auto body shop policy is general liability insurance. We recommend general liability insurance as your first line of defense against a variety of the most general and commonly occurring claims.

Some of the risks general liability insurance covers are:

• Bodily injury
• Property damage
• Medical payments
• Legal defense and judgment
• Personal and advertising injury

While an auto body shop may not be legally required to carry general liability insurance, operating without it is extremely risky. If your auto body shop is sued, you could face fees totaling hundreds of thousands of dollars (or more).

Compare the average cost of general liability insurance for an auto body shop to other professional industries using the graph below:

Several factors can determine the price of your insurance policy. These include your:

• Location
• Deductible
• Number of employees
• Volume of business
• Per-occurrence limit
• General aggregate limit

You may be able to acquire general liability insurance at a discounted rate by purchasing it as part of a business owner’s policy (BOP) rather than as a standalone policy.

A BOP is a more comprehensive solution that includes multiple forms of coverage, such as business interruption and property insurance.

Example 1: A customer coming to visit your garage slips on some mystery fluids that had leaked to form a puddle in your parking lot. The customer has to be treated at the hospital for a sprained wrist and expects you to pay for their medical bills. If found liable, your business could be covered by general liability insurance for medical damages owed or a settlement with the injured customer.

Example 2: Your mechanic installs a faulty brake line in a customer’s car. When the customer leaves your shop, they crash into a parked car because of the faulty brakes. Your general liability insurance would likely help you cover any legal bills and pay for the damage.

Example 3:  While repairing a customer’s vehicle, your car hoist malfunctions and the car falls several feet, causing the airbags to deploy and resulting in additional needed repairs. Your general liability insurance may assist your business in covering the cost of the additional repairs and any legal costs or settlement with the customer.

Check out our review of the Best Small Business Insurance Companies.

While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of.

Garage Keepers Insurance

Similar to general liability insurance, garage keepers insurance (also known as garage liability insurance or auto mechanic insurance) protects you from lawsuits filed by third parties who allege that your company is legally responsible for their injuries or property damage as a result of your garage's operations.

Unlike general liability insurance, garage keepers insurance specifically covers incidents like a garage employee damaging a customer’s car while taking it for a test drive. 

Although garage keepers insurance is an optional coverage designed for garages and auto body shops, it can save you from costly liability for vehicles you work on, test drive, or store on your property to perform service.

Commercial Property Insurance

If your auto body shop owns any type of property worth $10,000 or more, you will need to invest in a commercial property insurance policy to insure your business’s assets. Many auto body shops quickly rack up this amount in tools, equipment, and inventory.

Commercial property insurance helps cover the costs of replacing/repairing inventory, equipment, real estate, and more in the event of unexpected damage.

Commercial Umbrella Insurance

For many auto body shops, commercial umbrella insurance is an important policy to take out. Commercial umbrella insurance exists to cover those gaps beyond existing policies, ensuring that your auto body shop doesn’t find itself crippled by an extreme and unpredictable loss.

Commercial Auto Insurance

If your auto body shop owns a vehicle to pick up or drop off patients, make pickups or deliveries, or for any other business-related reason, you will also need a commercial auto insurance policy. This insurance policy will cover automotive damages incurred if your automobile or delivery vehicle is damaged on the road.

Home-Based Business Insurance

If your auto body shop is run from home, your normal home insurance policies may not cover accident damages related to your business.

Home-based business insurance is designed with this in mind, and it is often available through a business owner’s policy or as a rider extension for existing homeowner insurance.

Worker’s Compensation Insurance

In most states, if you have any employees other than yourself (and sometimes family members), you will need to purchase workers’ compensation insurance. Workers' compensation insurance, or "worker’s comp” for short, is a type of insurance that covers accidents, injuries, and illnesses that employees may suffer on the job. Worker’s compensation coverage aids with the payment of medical expenses, missed wages, and other costs associated with illness or injury, no matter who was at fault.

Although it’s easy (and essential) to invest in business insurance, it shouldn’t be your only defense.

Here are several things you can do to better protect your auto body shop:

• Use legally robust contracts and other business documents. (We offer free templates for some of the most common legal forms.)
• Set up an LLC or corporation to protect your personal assets. (Visit our step-by-step guides to learn how to form an LLC or corporation in your state.)
• Stay up to date with business licensing.
• Maintain your corporate veil.