Running an auto repair shop means you're juggling a lot of risk. Customer cars worth tens of thousands of dollars sit in your bays. Employees work with heavy equipment, chemicals, and power tools. A customer could slip on your garage floor. A fire could start in your paint booth. Any one of these scenarios could bankrupt an uninsured shop.
That's where business insurance comes in. The right coverage protects your shop from lawsuits, property damage, employee injuries, and those nightmare scenarios that keep shop owners up at night. Here's what you need to know about insuring your auto repair business in 2025-2026.
Essential Coverage Types for Auto Repair Shops
Most auto repair shops need several types of coverage working together. Let's break down what each one does.
General liability insurance is your foundation. It covers third-party injuries and property damage—like when a customer trips over a tool and breaks their ankle, or when you accidentally scratch a customer's vehicle while moving it. Auto repair shops pay an average of $54 per month for general liability coverage, with 44% of shops paying less than $50 monthly. Most policies include $1 million per occurrence and $2 million aggregate limits, which is the industry standard.
Garage keepers insurance protects customer vehicles while they're in your care. If someone's car gets stolen from your lot overnight, or a fire damages vehicles in your bays, garage keepers coverage pays for repairs or replacement. This typically costs $1,000 to $1,300 annually. Here's the important part: get direct primary coverage, not just legal liability. Direct primary pays claims without requiring you to prove who was at fault. Legal liability only covers your negligence, which means if a customer's car is vandalized because you forgot to lock up, you're covered—but if it's vandalized despite proper security, you might not be.
Workers' compensation insurance is required in almost every state if you have employees. It covers medical expenses and lost wages if a mechanic gets injured on the job—whether that's a back injury from lifting an engine or chemical burns from brake cleaner. Expect to pay around $93 per month per employee, or roughly $1.29 per $100 of payroll. The exact requirement varies by state: New Jersey requires coverage with just one employee, while Alabama doesn't mandate it until you have five employees.
Commercial property insurance covers your building, equipment, tools, and inventory. If a fire destroys your lift equipment or thieves steal your diagnostic computers, property insurance replaces them. This is especially important for shops with expensive specialized equipment.
What Auto Repair Insurance Actually Costs
The average automotive shop pays between $4,000 and $12,000 per year for business insurance, but that number moves around considerably based on what kind of work you do.
Quick lube and oil change shops typically pay $3,000 to $8,000 annually because they're performing lower-risk services. General auto repair shops land in the $4,000 to $10,000 range. Auto body and collision shops pay the most—$8,000 to $20,000 per year—because they face higher risks from paint booth fires, chemical exposure, and more valuable vehicles in their care.
Location matters too. Maine shops enjoy some of the lowest rates at $132 monthly compared to the national average of $153. California and New York shops pay more—$170 and $177 monthly respectively. Louisiana has the highest rates at $184 per month.
Your claims history, revenue, number of employees, and coverage limits all influence your premium. A shop with multiple claims in the past three years will pay more than a shop with a clean record. Higher coverage limits increase your premium but provide better protection.
The Biggest Risks Auto Repair Shops Face
Understanding what could go wrong helps you choose the right coverage. The most common claims at auto repair shops involve customer vehicles being damaged or stolen while in your possession. A hailstorm hits your lot. Someone breaks in overnight and takes three customer cars. These scenarios happen more often than you'd think.
Fire is another major risk, especially for body shops with paint booths. Welding operations, electrical work, and flammable chemicals create fire hazards. One spark in the wrong place could destroy your entire facility plus every vehicle inside.
Employee injuries are common in this industry. Mechanics work with heavy parts, dangerous equipment, and hazardous chemicals. Back injuries from improper lifting, burns from hot components, and cuts from sharp metal edges all happen regularly. That's why workers' comp is legally required—these injuries can result in massive medical bills and lost wages.
Environmental liability is increasingly important. Improper disposal of oil, antifreeze, or other automotive fluids can result in EPA violations and cleanup costs. Pollution liability coverage protects you if your shop causes environmental contamination.
Then there's the faulty repair lawsuit. A customer claims your brake job was done incorrectly and caused an accident. Even if the allegation is baseless, defending yourself in court costs thousands. Professional liability coverage (also called errors and omissions insurance) handles these situations.
Should You Get a Business Owner's Policy?
A Business Owner's Policy (BOP) bundles several coverages together: general liability, commercial property insurance, and business interruption coverage. For small to medium-sized shops, a BOP is often more cost-effective than buying each policy separately.
The business interruption piece is particularly valuable. If a fire forces you to close for two months while you repair the damage, business interruption insurance replaces your lost income and covers ongoing expenses like rent and loan payments. Without it, many shops can't survive an extended closure.
However, a BOP doesn't include everything. You'll still need to purchase workers' compensation, garage keepers insurance, and commercial auto insurance separately. Think of a BOP as your foundation, not your complete insurance package.
How to Get the Coverage You Need
Start by assessing your specific risks. An oil change shop faces different exposures than a full-service collision center. Make a list: Do you store vehicles overnight? How many employees do you have? What's the value of your equipment and inventory? What services do you offer?
Next, check your state's requirements. Visit your state's department of insurance website or ask your insurance agent about mandatory coverages. Workers' comp requirements vary significantly by state, and some states have additional requirements for auto-related businesses.
Shop around with multiple insurers. Rates for the same coverage can vary by thousands of dollars. Get quotes from at least three carriers. Some specialize in auto repair shops and offer better rates or more comprehensive coverage than general business insurers.
Don't just chase the lowest premium. A cheap policy with huge gaps in coverage isn't a bargain. Review what's excluded, check the deductibles, and understand the claims process. Ask about direct primary garage keepers coverage specifically—it's worth the extra cost.
Finally, review your coverage annually. As your business grows—you hire more employees, expand your facility, or add new services—your insurance needs change. What protected a two-person operation won't be adequate for a ten-person shop. Stay on top of it, and you'll sleep better knowing your business is protected.
