What is a Garage Liability Policy?

Garage Liability insurance covers your dealership’s operations including test drives, vehicle storage, and service department activities. It includes coverage for bodily injury, property damage, and completed operations. Unlike a standard business policy, it’s specifically designed to address the unique risks that automotive dealers face daily.

Disclaimer: This content is for informational purposes only and does not constitute legal, financial, or insurance advice. Requirements may change. Verify current rules with FLHSMV or a licensed professional.

Who needs it

• Franchise and independent auto dealers, motorcycle/RV/boat dealers, auctions, and wholesalers.
• Repair shops that also sell vehicles or let customers test drive.

Why dealerships need specialized insurance

A standard general liability policy isn’t enough for auto dealerships because it typically excludes:

• Coverage for vehicles in your care, custody, or control
• Test drive accidents
• Service and repair operations
• Sale and delivery of vehicles

Garage liability policies are specifically written to cover these automotive industry risks.

What garage liability insurance covers

1. Test drives and demonstrations

When customers test drive vehicles from your lot, garage liability provides coverage for:

• Bodily injury to the driver or passengers
• Property damage caused during the test drive
• Accidents that occur on or off your premises

2. Dealership premises operations

Coverage for incidents that occur at your dealership:

• Customer slip and fall accidents
• Damage to customer property while on your lot
• Injuries from lot operations or vehicle movements

3. Service department activities

If you operate a service department, the policy covers:

• Bodily injury during vehicle maintenance
• Property damage while servicing vehicles
• Completed operations after service work

Note: Physical damage to customer vehicles in your care is covered by garagekeepers coverage, not garage liability. See the comparison below.

4. Employee vehicle operation

Coverage when your employees:

• Drive dealership inventory
• Deliver vehicles to customers
• Move vehicles around the lot
• Test drive vehicles

Garage liability vs. garage keeper’s coverage

Garage Liability: Covers third-party bodily injury and property damage

Garagekeepers Coverage: Covers physical damage to customer vehicles in your care, custody, and control (theft, fire, weather, collision)

Dealer’s Open Lot: Covers physical damage to your own inventory on the lot (theft, hail, vandalism, etc.)

Most dealers need all three for complete protection.

Coverage limits and options

Standard garage liability policies offer various limit options:

Basic minimum (Florida requirement):

• $25,000 combined single limit (liability)
• $10,000 PIP

Recommended coverage:

• $100,000/$300,000 bodily injury
• $50,000+ property damage
• $1-2 million umbrella policy

Additional coverages to consider

Garagekeepers legal liability: Covers physical damage to customer vehicles left in your care

Dealer’s open lot: Covers physical damage to your own inventory

False pretense coverage: Covers theft by individuals posing as legitimate buyers

Mechanical breakdown protection: Coverage for warranty claims on sold vehicles

On-hook towing: Covers vehicles while being towed by your dealership

How premiums are calculated

Insurance carriers consider multiple factors:

• Gross sales and inventory value
• Number of service bays
• Employee count
• Claims history
• Location
• Security measures
• Types of vehicles sold

Common exclusions

Garage liability typically doesn’t cover:

• Employee injuries (need workers’ comp)
• Professional liability/errors
• Pollution or environmental damage
• Cyber liability
• Employment practices liability

Getting garage liability coverage

When shopping for garage liability insurance:

1. Work with a specialized agent - Choose an agent familiar with dealer operations
2. Provide accurate information - Underwriting requires detailed business information
3. Review coverage carefully - Understand what’s included and excluded
4. Compare multiple quotes - Rates vary significantly between carriers
5. Review annually - Update coverage as your operations grow

Why choose ISBA for your garage liability insurance

We specialize in Florida dealer insurance with access to multiple carriers that write garage liability policies. Our team understands automotive operations and can help you:

• Meet Florida’s minimum requirements
• Obtain appropriate coverage limits
• Find competitive premiums
• Navigate the application process
• Handle policy renewals and updates

Related resources

• Florida minimums and examples: /isba/resources/florida-dealer-insurance-requirements-explained
• Dealer bond basics: /isba/resources/florida-dealer-bond-requirements
• What is a dealer bond?: /isba/resources/what-is-motor-vehicle-dealer-bond

Quick FAQ

• Does garage liability cover inventory? No. Add garage keeper’s/dealer’s open lot for physical damage to vehicles you hold.
• Is garage liability required in Florida? Dealers must meet minimum limits set by FLHSMV; confirm current amounts with your carrier.
• How is it different from general liability? Garage liability is tailored to auto operations (test drives, service, completed ops); general liability often excludes these.
• What limits are common? Statutory minimum is $25,000 CSL + $10,000 PIP; many dealers carry higher split limits like $100k/$300k/$50k plus an umbrella.

References

[1] https://www.flhsmv.gov/insurance/ [2] https://www.flhsmv.gov/motor-vehicles-tags-titles/dealers-installers-manufacturers-distributors-importers/mv-rv-mh-dealer-broker-licenses/mv-rv-mh-dealers-faqs/

Last reviewed: February 4, 2026.