What is the difference between garage keepers vs. garage liability insurance?

Any business that maintains or stores customer vehicles on its property faces unique risks. A customer's car could be stolen or vandalized, or a customer could be injured by an accident at your garage.

Garage liability insurance and garage keepers insurance are two insurance policies designed specifically to protect auto service businesses.

• Garage liability insurance protects against the risks of allowing customers into a garage, such as slip-and-fall injuries or accidental damage to a customer's property—excluding their vehicle.
• Garage keepers insurance covers customer vehicles that are stolen or damaged while in your care. It's sometimes called storage location insurance or garage keepers liability insurance.

A garage liability insurance policy is a type of general liability insurance that’s designed for the unique risks of operating a garage with heavy machinery and other hazards.

For most businesses, general liability coverage insures against common claims from people outside of your business. For example, it would cover a customer's bodily injury, damage to a customer’s property, or an accusation of slander or copyright infringement.

However, general liability insurance excludes these risks for businesses that sell, store, and service vehicles as part of their business operations. This includes car dealerships, service stations, body shops, oil change shops, tow truck operators, and parking garages.

Garage liability coverage, also known as garage insurance, provides the same protection as general liability, but extended to the risky setting of a garage. This type of coverage includes:

• Customer injuries and related medical bills
• Physical damage to a customer’s property at your business (but not their vehicles)
• Products-completed operations insurance, in case a customer claims they were physically or financially harmed because your business used defective parts or made a faulty repair
• Legal defense costs for any of the above, including a settlement or court-ordered judgment

Garage keepers insurance covers damage or theft of a customer’s vehicle while it's in your care, custody, or control. That includes when it's parked, being serviced, or during a test drive.

This policy covers vehicles stored in a parking garage or a dealer's lot, or serviced at an auto repair shop or car wash. If a customer’s car is damaged by fire, vandalism, or an employee's carelessness, your garage keepers insurance protects you from financial losses, including legal costs if the customer sues.

Even if the customer had comprehensive coverage and filed a claim with their personal auto insurance, their insurance company could blame you for the loss and expect your business to pay.

There are a few kinds of garage keepers insurance coverage:

• Legal liability insurance pays for a claim if you're found legally responsible for a loss, such as negligence that led to theft of a customer's vehicle.
• Direct primary insurance automatically covers a loss, regardless of who is at fault.
• Direct excess insurance covers losses after the customer's personal auto insurance reaches its limit.
• Dealer's open lot (DOL) or dealer's physical damage coverage covers an auto dealer's inventory.

Direct primary coverage is more expensive than the other options. A key reason for choosing direct primary coverage is it can make your customers happier by quickly resolving a claim, rather than dealing with lawyers and accusations over who was at fault for a vehicle’s theft or property damage.

You can choose to buy a policy that covers collisions and theft, or comprehensive coverage that protects against non-collision damages like fires, floods, and hail. Be sure to carefully read the policy details so you know what's covered.