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Is Garage Liability Insurance Required?

Some dealers have inquired whether purchasing garage liability insurance is required. While the short answer is no, TIADA recommends dealers do so as a best practice. 

Texas law requires that anyone who owns or assumes responsibility for, a motor vehicle provide a minimum of:

$30,000 per person, up to $60,000 per accident AND
$25,000 for property damage per accident 

OR

$85,000 in garage liability insurance.

Several TIADA Associate Members in the insurance industry offered to share valuable advice for dealers looking to obtain garage liability insurance to protect their businesses. 

“When purchasing Garage Liability, you should always consider an agent who represents multiple carriers in order to provide your dealership with the best coverage available,” said Kevin Smith of Kevin Smith's Tri State Dealer Services. “An example might be that your business keeps all the inventory of cars inside a building that protects them from weather-related claims etc. There are some carriers that give major discounts for keeping vehicles inside a locked building and there are many that do not. Not having an agent with access to multiple carriers may hinder you from getting the best coverage available.

“Another example is there are some carriers that do not charge for the first wrecker on the Garage Liability policy while others charge over $1,500 a year for the first wrecker. Having an agent who is knowledgeable with multiple carriers will be able to help you take advantage of these discounts offered.”

Ann Mullen-Martin, President of Mullen Insurance Agency, added, “That $85,000 is the absolute minimum and often does not represent the amount needed, just the amount required.”

Mullen also passed along the following tips for dealers to consider when purchasing insurance to protect their business:
  • Dealers rarely, if ever, lose their businesses because their inventories are not insured; they lose their businesses because they do not carry enough liability protection. Liability protects not only their businesses but their personal assets. LLC's and corporations help, but no corporate shield is completely impenetrable if the loss and the lawyer are just right.
  • Liability is more than just auto insurance. It includes premises protection and can be endorsed to include medical payments, dealers errors & omissions, physical damage for the customers' cars while in the possession of the dealer and so much more.
  • A correctly designed garage liability policy should be among the first foundation stones assembled by any dealer to help assure a protected business. 
  • Garage insurance plans are much more than just ‘garage liability.' They may include: liability, inventory, property and crime coverages….and don't forget workers comp protection.
  • When assembling their insurance protection packages, dealers should consider all of their possible exposures and then make an informed decision based on their own insurance philosophies and budgets.   
  • The most important insurance decision any dealer makes is the choice of his agent.  Find one who specializes in your industry, who has the experience, the reputation and the desire to work with Texas Independent Auto Dealers and you, in particular. 
Your insurance agent will be your best resource for questions. Several insurance agents who regularly work with Texas independent auto dealers are members of TIADA. You can find their info on www.txiada.org/AF_MemberDirectory.asp.

Kevin Smith is the owner of Kevin Smith's Tri State Dealer Services. He can be reached kevinsmithinsurance@gmail.com or at 1-800-687-3636.

Ann Mullen-Martin is the President of Mullen Insurance Agency, Inc. She can be reached at AMullen@mulleninsurance.com or 1-800-783-6297.

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