Boaz 256-593-7042 Huntsville 256-539-5307 Guntersville 256-582-2131

Alabama Garage Liability Insurance: Essential Protection for Your Auto Business

Date Posted: January 1, 2024 10:09 am

Alabama Garage Liability Insurance: Essential Protection for Your Auto Business

In the state of Alabama, businesses that operate vehicle dealerships or automotive repair shops are required to maintain a certain level of insurance to protect against liabilities arising from their operations. Known as garage liability insurance, this policy is essential for mitigating the risks associated with vehicle-related businesses.

The mandate ensures that in the event of an auto accident or damage, the dealership or auto shop’s financial responsibilities are addressed, safeguarding both the business and its customers.

To complement garage liability, businesses may also opt for garage keeper’s insurance, which covers customer vehicles while they are in the care, custody, or control of the business. This differentiation between coverage for the business’s inherent operations and the protection of customer property is vital.

Dealers Open Lot Insurance also provides coverage but pertains specifically to the inventory of vehicles held by a dealership. Understanding these distinctions and the various levels of coverage available is crucial for running a compliant and protected automotive business in Alabama.

Key Takeaways

  • Alabama mandates garage liability insurance for automotive businesses.
  • Garagekeepers insurance provides additional coverage for customer vehicles.
  • Dealers Open Lot Insurance focuses on the inventory protection for dealerships.
Garage Liability Insurance

Garage Liability Insurance

Garage liability insurance serves as a critical form of business insurance, specifically designed to address the unique risks faced by businesses involved in garage operations. It covers both legal costs and potential compensation for bodily injury and property damage claims.

Coverage Scope

Garage liability coverage typically includes legal defense and compensatory payments related to accidents within garage operations. It extends to auto dealers, repair shops, service stations, and towing services. This insurance package is essential in protecting against financial losses due to lawsuits or third-party claims for bodily injury and property damage.

Types of Businesses Covered

This form of liability coverage is tailored for businesses that have operations involving vehicles, such as auto dealerships, mechanics’ garages, body shops, service stations, and towing companies. Businesses that provide parking facilities or valet services also fall under the umbrella of entities needing garage liability insurance.

Coverage Limits

Coverage limits for garage liability policies vary depending on the business’ size and risk exposure. Limits are chosen based on the potential severity of claims and the business’s financial capability to handle liability. In Alabama, for instance, dealerships must carry a minimum limit of $75,000.

Covered Liabilities

Garage liability insurance generally covers liabilities such as bodily injury and property damage that occur as a result of garage operations. It also aids with the legal costs associated with defending against such claims. This includes accidents involving service vehicles as well as incidents occurring on the premises.


Typical exclusions from garage liability coverage include intentional acts, errors and omissions, general liability not connected to garage operations, and liabilities surpassing the policy’s limits. Moreover, personal property in the care, custody, or control of the business may require a separate policy known as garagekeepers liability.

Cost Factors

The cost of garage liability insurance is influenced by numerous factors, including claims history, types of services offered, the number of service vehicles, employee driving records, coverage limits, and deductibles. An insurance policy for a garage liability insurance can range in cost, illustrating how these factors can affect premiums.

Garagekeepers Insurance

Garagekeepers Insurance is essential for businesses that handle customer vehicles, offering protection against potential property damage while vehicles are under their care, custody, or control. This insurance plays a crucial role in safeguarding both the garagekeeper’s financial stability and customer trust.

Coverage Scope

Garagekeepers insurance is designed to protect a customer’s vehicle when it is being stored, serviced, or repaired by a business. It essentially covers property damage to vehicles that are in the garagekeeper’s possession, extending beyond general liability policies which do not cover vehicles under the business’s care.

Types of Garagekeepers Insurance

There are typically two main types of garagekeepers insurance:

  1. Legal Liability Coverage: protects a business when they are legally liable for the damage caused to a customer’s vehicle.
  2. Direct Primary Coverage: offers protection regardless of liability, meaning that the business is covered even if they aren’t at fault for the vehicle’s damage.

Coverage Limits

Coverage limits refer to the maximum amount an insurance company will pay out for a covered claim. Garagekeepers insurance usually comes with various limit options, which can be chosen based on the individual needs of the business. The garagekeeper must decide on both a per-vehicle deductible and the maximum limit of coverage.


Exclusions in garagekeepers insurance are specific situations or types of damage that the policy does not cover. Common exclusions include:

  • Intentional damage caused by the business owner or employees.
  • Theft by the insured party.
  • Property inside the vehicle that isn’t part of the factory installed equipment.

Cost Factors

The cost of garagekeepers insurance is influenced by several factors including:

  • Claims history: A history of many claims can lead to higher premiums.
  • Deductibles: A higher deductible can reduce the premium but increase out-of-pocket costs in the event of a claim.
  • The limits a business opts for: higher limits result in higher premiums.
  • The number of vehicles the business handles.

Legal Requirements

In certain states, such as Alabama, having a minimum garage liability coverage is required by law for businesses that offer garage services. This can vary significantly between states, and it is crucial for business owners to understand and comply with these requirements to avoid legal and financial penalties.

Legal Liability Vs Direct Primary Coverage

In Alabama, garage liability insurance is critical for any business involved with vehicles. This insurance comes in two main forms: Legal Liability and Direct Primary Coverage. Each type offers distinct protection levels tailored to different scenarios that can affect a garage keeper’s financial security and customer confidence.

Legal Liability Coverage

Legal Liability Coverage is designed for scenarios where the garage keeper is at fault or negligent. This policy provides protection when the garage keeper is legally responsible for damage to a customer’s vehicle in their care. It is a component often included in a broader Business Owner’s Policy (BOP), tailored to mitigate risks associated with daily operations.

For instance, if a mechanic accidentally crashes the vehicle during a test drive, or neglects to engage the parking brake causing the vehicle to roll into a garage pit, the insurance coverage would be applicable as it was your employee’s mistake.

Direct Primary Coverage

On the other hand, Direct Primary Coverage is more comprehensive. It protects customer vehicles regardless of fault, meaning that the business is covered even if they are not responsible for the damage. This form of coverage can instill greater confidence among customers, knowing their property is safeguarded while on the garage premises.

For instance, if a car is damaged by adverse weather conditions, or if a thief manages to steal a securely locked vehicle, the insurance policy would cover the resulting damages or losses, despite the garage being faultless. Consequently, a customer wouldn’t need to make a claim under their personal auto insurance.

Choosing Between the Two

When deciding between Legal Liability and Direct Primary Coverage, garage keepers must consider the cost and coverage options. Legal Liability may come with a lower premium but offers more limited protection. Conversely, Direct Primary can be costlier but provides a broader safety net, which can be a strategic advantage for gaining customer trust.

Combination Coverage

Many businesses opt for a combination of both coverage types to balance protection and cost. An insurance package incorporating both Garagekeepers Legal Liability and Garagekeepers Direct Primary allows garage keepers to manage risks comprehensively. It’s essential to evaluate the degree of coverage needed based on the individually assessed risks and customer expectations regarding vehicle safety.

Dealers Open Lot Insurance

Dealers Open Lot Insurance

Dealers Open Lot Insurance is essential for auto dealerships to protect against financial loss from physical damage to vehicles on their lot. This specialized insurance covers a range of potential damages including collision, theft, fire, and vandalism.

Coverage Scope

The coverage typically encompasses protection against loss or damage to vehicles that are part of a dealership’s inventory. This includes both new and used vehicles, and it may often extend to vehicles that are left for service or repair.

Types of Vehicles Covered

Auto dealerships benefit from this coverage as it applies to all vehicles on the lot, whether they are for sale or lease, including cars, trucks, motorcycles, and sometimes specialty vehicles. The specific types of vehicles covered can vary depending on the policy and carrier.

Coverage Limits

Coverage limits for Dealers Open Lot Insurance are typically set at an agreed value for each vehicle or can be set as a blanket amount that covers the value of the entire inventory of vehicles.

Optional Coverages

Optional coverage might include gap insurance, which can cover the difference between a vehicle’s actual cash value and the amount still owed on it. Additionally, coverage for “other than auto” liability may be available.

Coverage Exclusions

It’s important to note that coverage usually excludes normal wear and tear, mechanical breakdown, and damages from improper maintenance. Certain exclusions also apply for dealership property or operations outside the scope of physical damage to vehicles.

Transportation Coverage

Dealers Open Lot Insurance may offer extensions for transportation coverage, which provides protection for vehicles when they are being transported from one location to another, whether by carrier or by driving.


Policies will include a deductible, the specified amount the dealership pays out of pocket before the insurance coverage kicks in, in the event of a claim due to loss or damage.

Risk Management

To minimize claims and potential premium increases, it’s crucial for dealerships to implement effective risk management strategies and security measures. These can range from installing surveillance systems to enforcing strict inventory control protocols.

Before Life Rains Chaos, Arm Yourself with Woodall & Hoggle

Life doesn’t give warnings. A peaceful morning can quickly turn into a day of loss – your home, your car, your sense of security, all gone in a blink. At Woodall & Hoggle, we transform your fears into fortitude with bespoke personal insurance solutions.

 Protect your sanctuary with our homeowner’s insurance, keep your journeys secure with our auto coverage, and safeguard your family’s future with life insurance. Don’t let life’s unexpected twists leave you stranded. Take action today. Visit Woodall & Hoggle to anchor your life in safety and certainty.

Frequently Asked Questions

What does garage liability insurance typically cover in Alabama?

Garage liability insurance in Alabama is designed to protect auto dealerships and repair shops from liability claims. This type of insurance typically includes coverage for bodily injury, property damage resulting from operations, and legal defense for covered claims.

How does garagekeepers liability insurance differ from garage liability insurance?

Garagekeepers liability insurance offers protection for damages to vehicles that are kept at a business location for servicing, repair, parking, or storage. This is distinct from garage liability insurance, which covers general business liability and operations, but not the vehicles in the business’s custody.

What factors influence the cost of garage liability insurance in Alabama?

The cost of garage liability insurance in Alabama can be affected by a range of factors including the size of the business, number of employees, the types of services offered, loss history, and the insurance company’s underwriting criteria.

Are businesses in Alabama required to carry garage liability insurance?

Yes, businesses like auto dealerships and auto repair shops in Alabama are generally required to carry garage liability insurance to operate legally. This ensures a minimum level of financial protection against operational liabilities.

How can a business file a claim under a garage liability insurance policy?

To file a claim under a garage liability insurance policy, a business should notify their insurance provider promptly of an incident. Documentation of the incident and any damage claimed will be required as part of the claim process.

What is the coverage limits commonly available for garage liability insurance in Alabama?

The coverage limits for garage liability insurance in Alabama can vary, but garage liability insurance for dealerships requires a Surety Bond of $50,000 and Garage Liability coverage of $75,000. The minimum blanket liability insurance coverage limits for all vehicles related to the business are $25,000 per person for bodily injury, $50,000 total for bodily injury per accident, and $25,000 for property damage per accident, or a combined single limit of $75,000 per accident.

© 2024 Woodall & Hoggle Insurance Agency Inc. | All Rights Reserved. | Sitemap Designed by 800Commerce Created By: Transformational Outsourcing Inc.