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Auto Body Insurance Mysteries Solved!

Eight of the most common misconceptions auto body shop owners have about their insurance policies.

Brian Boland is partner and chief sales officer at Garage Guard by Evarts Tremaine.

You work with insurance companies every day. Most likely, you’re an expert at navigating the system to find the best outcomes for your customers and your business. But do you know where your collision repair insurance policy is right now? Do you know if you’re completely covered in the rapidly changing automotive and insurance markets?

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Test your smarts against eight of the most common misconceptions our team has heard over nearly 25 years of providing insurance policies to auto body shop owners:

Misconception #1: Our Employee Tools Are Covered Under Our Current Policy

It’s uncommon for a mainstream insurance policy to include coverage for employee tools within their contents coverage. For policies that do include coverage for employee tools, it’s often up to a $2,500 reimbursement following a covered loss such as theft or fire. In many cases, $2,500 won’t begin to cover some of the high-value tools and equipment employees bring to the job. In today’s competitive market for top employees, offering insurance coverage for their tools is one more benefit you can add to attract the best new employees for your shop.

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Misconception #2: All Our Employees Are Safe Drivers

How would you know? Especially if you haven’t done a check on their driving records lately. Are you overlooking the DUI one of your employees got last Christmas? You could be putting your business at risk by knowingly putting employees with questionable driving records behind the wheel. Insurance underwriters often ask for this data when rating a new policy. Good driving records can often affect policy pricing in the right direction.

Misconception #3: My Customers’ Cars Are Protected Under My Liability Policy

Think again. Often, your liability policy covers damages resulting from negligence. Garagekeeper’s insurance is a separate and distinct limit on your policy. If you do have garagekeeper’s insurance, it’s always good to review it as you may not have the correct protection limits for the current market. New and used car costs have gone up. Technology is driving the industry. Ask yourself, would you have enough coverage if a technician has an accident while taking a spin around the block to test drive a client’s new Tesla or when a new employee forgets to lock your client’s vintage vehicle – and it gets stolen?

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And, if the unthinkable happens and a fire engulfs your entire property, garagekeeper’s insurance could prevent your customers’ insurance companies from coming after you for recompense on an individual basis.

Remember, your liability coverage would not cover this type of unexpected happening. Think about garagekeeper’s insurance as your comprehensive and collision coverage for customer vehicles.

Savvy auto body shops protect their customers’ cars (and their own interests) with garagekeeper’s insurance.

When quoting garagekeeper’s insurance, underwriters look at key risk management factors including:

  • Are the lock boxes tightly secured to safeguard customer keys?
  • Is outdoor night lighting present?
  • Is a central alarm system armed and ready?
  • Does the shop have a protocol in place for parking higher value vehicles indoors overnight?

Having these risk management elements in place often can influence the price of the policy.

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Misconception #4: Our Paint Booth Is In Great Shape

This one is simple. If your paint booth has a suppression system that is UL-approved by the Underwriter’s Laboratory, it opens the possibility of preferred pricing for your insurance. It is also a positive risk management practice.

Misconception #5: Our Loaner Car Agreement Is Air-Tight

Having a strong courtesy car (loaner car) agreement is one of the most important things a shop can do to protect itself. It’s important to hire an attorney to review, update and approve this document. Additionally, on the topic of loaner cars, ask yourself what type of loaner car practices you keep. Do you have an age limit? Do you use a fast-lane system for key customers? How do you verify insurance?

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Misconception #6: I Don’t Have Time To Train My Technicians

By investing in training, you can limit your claims. Most liability claims in shops are due to errors made by poorly trained technicians. A well-trained technician is much less likely to botch a job that could leave you liable for damages. Employee training, including certification programs, is your first line of defense against possible mistakes that could end up costing you.

Misconception #7: Pollution Coverage Is Not For Us

The paints, solvents and chemicals used in body shops create unique risks that require protection for several possibilities. With full pollution coverage, you can safeguard your investment in case of leaks that cause EPA issues. In case of fire, you’re covered for any pollution claims that result from chemicals released into the atmosphere.

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Misconception #8: I Turn All Claims In, That’s Why I Have Insurance

Smart body shop owners pick their battles. They know their insurance rate can go up the more claims they submit. The best shop owners have a threshold they often consider – they take care of the smaller claims such as fender benders – on their own. They only file claims over the threshold they set. Insurance should not be a catchall for everything as filing multiple claims sends red flags to current and future insurers that you may be a bad risk profile.

Summary

Reviewing your insurance may not seem like fun. Neither is going to the dentist, but we all know both are necessary ingredients for overall health and wealth. In many cases, an insurance review could save you money. It may also spotlight areas where you’re exposed or have incorrect coverages for your specific situation.

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Protecting your investment in the business you’ve built and the lifestyle you’ve become accustomed to shouldn’t be an afterthought. Doing so can mean the difference between flourishing and floundering.

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