Last Updated: February 21, 2024, 1:54 pm by TRUiC Team

Custom Car Shop Business Insurance

Getting insurance for your custom car business is essential.

Custom car businesses need to be protected financially from various risks that come from operating a company, such as property damage claims.

For example, a customer may claim that your company damaged their vehicle while it was being customized.

We’ll help you find the most personalized and affordable coverage for your unique business. 

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

Best Insurance for a Custom Car Shop Business

General liability insurance is — generally speaking — one of the most important insurance policies for custom car businesses. 

Some of the risks general liability insurance covers are:

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

Although general liability policies provide fairly comprehensive coverage, there are some things that they don’t cover. It may be advisable to purchase specialized policies to cover these risks. Such policies can include, for example: :

  • Workers’ compensation insurance
  • Commercial auto insurance
  • Business interruption insurance
  • Data breach insurance

Generally speaking, business insurance providers fall into one of two main categories:

  • Traditional brick-and-mortar insurers — This category includes large national brands like The Hartford and Nationwide. Such companies are a safe choice and offer high-quality insurance products. However, they’re on the expensive side because they employ agents to sell insurance from physical offices.  
  • Online insurers — As its name indicates, this category includes companies that sell insurance through their websites, usually with the help of AI rather than human agents. This means they have less overhead and can sell the same quality of insurance for much less. As a result, we recommend online insurers for small businesses. 

Let's Find the Coverage You Need

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Cost of General Liability Insurance

The average custom car shop in America spends between $500-$1,500 per year for $1 million in general liability coverage.

Compare the average cost of general liability insurance for a custom car shop business to other professional industries using the graph below.

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

  • Location
  • Deductible
  • Number of employees
  • 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.

Graph showing average price of general liability insurance prices per industry

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Find the Best Rate

Discover the best coverage at the lowest rate in our cheapest business insurance review.

Common Situations That General Liability Insurance May Cover for a Custom Car Shop Business

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Example 1: As you finish restoring a custom car and lower it down from the hydraulic lift, you realize it wasn’t secured properly and end up smashing the back end. General liability insurance will likely cover any damage to the vehicle and necessary repairs for your lift as well.

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Example 2: A customer comes into the service bay to check on the status of their vehicle restoration. As they tour the shop, they trip over a cord and break their wrist. With general liability insurance, you can rest easy knowing that the damages associated with a lawsuit will likely be covered by your policy.

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Example 3: As you move a fully restored custom car from the service bay out into the parking lot for pick-up, you accidentally smash into a side door. General liability insurance will likely cover the damages to the vehicle and the door as well.

Other Types of Coverage Custom Car Shop Businesses 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. Below are some of the most common types of coverage:

Workers’ Compensation Insurance

Most businesses are required to carry workers’ compensation coverage by state law. If one of your employees becomes injured on the job, this type of insurance policy will help to pay for their medical expenses and lost wages.

Commercial Property Insurance

If you own the building that your custom car shop operates out of, you should invest in commercial property insurance to protect the building and any business-related items stored inside. This coverage can help to cover the cost of damages after a fire, inclement weather, theft, and vandalism.

Garage Keeper’s Liability Insurance

If you keep custom cars on your lot for an extended period of time, they are at risk of being stolen or vandalized by burglars. This specialized insurance coverage is designed to help cover the cost of repairs or the replacement of stolen vehicles. 

Commercial Auto Insurance

Your personal auto insurance will not protect business vehicles. If you are involved in an accident or cause damage to another person’s property while operating a work vehicle, commercial property insurance works to cover associated damages.

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 custom car shop business:

  • 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.

Custom Car Shop Business Insurance FAQ

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.

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.

"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.

Every company needs to be financially protected by business insurance from the outset. It’s not wise to face the numerous risks of running a business, such as lawsuits and theft, without it. Plus, most states require some types of insurance for companies to operate, such as commercial auto if a company has vehicles.

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

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.