Business Insurance for Auto Body Shops

Every mechanic and auto body business needs insurance. Knowing which type of insurance you need and the best place to get it is the next step.

This article will cover the main types of business insurance and help you find the best auto body shop insurance.

Recommended: Next Insurance is dedicated to matching small businesses with the right policy at the best price.

Best Insurance for an Auto Body Shop

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).

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Cost of General Liability Insurance

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

chart showing average yearly premium for General Liability Policy

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.

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Common Situations That General Liability Insurance May Cover for an Auto Body Shop

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.

Other Types of Coverage Auto Body Shops Need

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.

Additional Steps To Protect Your Business

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.

Business Insurance is the Best Way to Protect Your Business

If you're starting a new business, then you need business insurance. It's as simple as that. The protection offered by an LLC will protect your personal assets, but your business's assets are still open to liability in the case of a lawsuit or other loss.

Be sure that everything you've built is safe by getting business insurance.

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Auto Body Shop Insurance FAQ

Can I buy business insurance online for my auto body shop?

Yes, absolutely. You will need to first get a quote from an online business insurance provider like Next Insurance. Next allows you to then purchase a policy immediately and your coverage will be active within 48 hours. 

What is included in a business owner’s policy?

A typical business owner’s policy includes general liability, business interruption, and commercial property insurance. However, BOPs are often customizable, so your agent may recommend adding professional liability, commercial auto, or other types of coverage to your package depending on your company’s needs.

What is the difference between business insurance and general liability insurance?

"Business insurance" is a generic term used to describe many different types of coverage a business may need. General liability insurance, on the other hand, is a specific type of coverage that business owners need to protect their assets.

Do I need insurance before I start an auto body shop?

You should invest in business insurance coverage for your business before your first interaction with a customer. Although the cost of insurance may seem high for a brand-new business, it’s best to be proactive when it comes to protecting your assets. After all, you can’t buy insurance to cover a loss that has already occurred.

Will insurance protect my auto body shop from everything?

Not necessarily. Certain exceptions may be written directly into your auto body shop insurance policy, and some perils may be entirely uninsurable.

Is general liability the same as business owners?

A general liability insurance policy covers only liability losses. A business owner's policy covers both liability and property losses.

How do I choose the best general liability insurance?

The best general liability coverage for your business really depends on the amount of coverage you’re comfortable with and how often you expect to file a claim. A relatively safe business with a very low risk of accident or legal liability could opt for lower premiums with higher deductibles. 

However, if you are in an accident or injury-prone industry or are making advertising claims about the effectiveness of your service or product, you may wish to consider more extensive coverage. We recommend using a digital insurance provider like Next Insurance.

Do I need business insurance if I already have an LLC?

Yes, an LLC is meant to create a legal barrier between your business and your personal assets and credit. If you haven’t formed an LLC yet, use our Form an LLC guide to get started.

An LLC doesn’t protect your business assets from lawsuits and liability– that’s where business insurance comes in. Business insurance helps protect your business from liability and risk.