Garagekeepers Coverage Helps Cover Liability to Cars Left in Possession of a Business
Garage Liability Insurance Coverage and Garagekeepers Coverage are two confusing types of insurance policies. If you as a business owner feel overwhelmed when trying to determine which is best for your business, you are not alone. These coverages are difficult to understand not only for most business owners looking to purchase the coverage, but also for many agents and customer service representatives who are looking to service and sell the policies. The main difference between garage liability and garagekeepers coverage is the difference between Liability Insurance and Physical Damage Insurance. Garage Liability Insurance covers the insured’s liability for operations and Garagekeepers Coverage covers damage to a customer’s vehicle. All businesses with garage risks need both coverages to properly insure their business. In this article we are going to examine the specifics of Garagekeepers Coverage.
What Exactly is Garagekeepers Coverage
According to the International Risk Management Institute, Garagekeepers coverage is, “Coverage provided under a garage policy for auto and trailer dealers, particularly those dealers that maintain a service department or body shop, for liability exposures with respect to damage to a customer’s auto or auto equipment that has been left in the dealer’s care for service or repair”. In layman’s terms this type of insurance is similar to a form of bailee liability where the purpose of the policy is to protect the client’s car, truck, or motorcycle while it is in the possession of the business. Policies differ from carrier to carrier, but a normal policy covers damages related to fire, theft, vandalism, or collision.
3 Parts of Garagekeepers Coverage
There are three main parts to this coverage that a business owner should speak with their agent about when adding this policy to their Business Owner’s Package. Those three parts are legal liability, direct primary, and direct excess. Legal Liability covers mechanic’s negligence. If damage is cause to a vehicle while in possession of the business, your business is covered. Two prime examples of this type of liability are when a mechanic damages a car while working on it or driving the car around the property. The other time this liability arises is when an employee forgets to lock the vehicle overnight and there is theft or vandalism as a result. Direct Primary means the client’s vehicle is protected regardless of whether the damage is due to negligence, theft not attributed to negligence, or damage due to extreme weather. Direct Excess is a type of coverage that is similar to “direct primary” coverage, but the difference is Direct Excess is paid only in excess of any amount collectible if the insured is not held legally liable. Like Direct Primary, Direct Excess protects a client’s vehicle regardless of fault.
Common Exclusions to Garagekeepers Coverage
Some common exclusions to a traditional Garagekeepers Coverage include: damage or theft of stereo equipment, loss of CD’s left in the backseat of a vehicle, loss of cellphones, scanners, or mobile radios, loss or damage to radar detection devices, defective parts installed on a vehicle, and even faulty work done by a mechanic.
There are many ways your insurance company can go about calculating the amount you will get paid in the unfortunate circumstance that you have an insurance claim. The two most common ways are referred to as ‘actual cash value’ and ‘replacement cost’. The price you pay in premium is dramatically different between the two coverages and so is the amount the insurer will pay out when a claim does occur.
Actual Cash Value
Actual cash value refers to an insurance policy that covers your property and some possessions for and agreed upon fair market price at the time they are lost or stolen. Since the items are damaged in the claim are used, “market value” means that depreciation will be factored in when your insurance company pays you for your claim.
Replacement cost refers to the amount it costs to replace what is destroyed. This policy will pay out a substantially larger amount than an actual cash value policy. This is because a replacement cost policy will pay to tear down a piece of property, haul off the damaged material and repair or rebuild the property to its original state. If the construction costs are higher now the policy will pay for the difference.
When a catastrophe happens, many business owners are happy they secured a replacement cost policy. For some business owners, the difference between the two policies can be the difference between keeping the business open and being for to close the doors for good. I strongly recommend you consider purchasing a replacement cost policy. At the very least you should have an honest conversation with your insurance professional about what risks your business faces and how much risk you are comfortable taking on.
Now a replacement cost policy does come at a substantial cost. The premium is substantially more for a replacement cost policy compared to an actual cash value policy. For new businesses just getting on their feet, an actual cash value policy is the only option because of their financial situation. This can also be the case for seasonal or cash strapped businesses. If this is the case, do not just settle for a lesser policy. Talk with your insurance professional about the difficulties you are facing to properly in sure your business. Many times they can find find a different policy or a different payment method to benefit you unique needs.
The other day I was going through my emails at work and I notice something that I hadn’t really noticed before. In the past couple months, I have received numerous emails from clients asking what different insurance policies cover and what additional coverage they need. After replying to each individual email, I came up with the great idea to create a template that briefly explains the different kind of business insurance policies a business owner might need.
What Types of Business Insurance Are Available?
The main types of business insurance you should consider include:
- Property and Casualty Insurance: Property insurance covers the physical location of the business (even if it is rented or leased) and its contents from things like fire, theft, flood, and earthquakes—although read the terms carefully to make sure they include everything you need. Casualty insurance, on the other hand, covers the operation of the business, but the two are usually grouped together in policies.
- Commercial Auto Insurance: Commercial auto insurance covers your business for loss or damage to vehicles used by your business and for damage to others caused by your business vehicles. Note that vehicles used for business are not covered under your personal auto insurance policy even if a vehicle is used for both business and personal purposes.
- Liability Insurance: Liability insurance covers you in the event someone sues you for negligence, which can occur, for instance, if someone falls on your property.
- Product Liability Insurance: Product liability insurance covers your business for damages caused by a product designed, supplied, or manufactured by your business.
- Business Interruption Insurance: Business interruption insurance can make up for lost cash flow and profits incurred because of an event that has interrupted your normal business operations.
- Health Insurance: Health insurance provides health coverage for you and your employees.
- Life and Disability Insurance: Life and disability insurance covers your business in the event of the death or disability of key owners, partners, or employees.
- Workers’ Compensation Insurance: If you have employees, you must, by law, participate in workers’ compensation programs; workers’ compensation insurance covers employees if they are injured on the job.
I get it! Trying to find the perfect coverage at an affordable price is extremely difficult. If you are a new business owner or even a business owner who hasn’t gotten any insurance before, it can be complicated. Not knowing what each term means in a policy is frustrating. That is why I provided a brief description of the basic policies that business owners frequently purchase. Never be scared to call a professional and ask them for more advice. And always make sure you are reading the exclusion page on your policy. You want to make sure you are properly covered for your job. The last thing you want is for something to happen, and realize something isn’t covered under your policy.