Why Are Auto Body Shops With Larger Property Difficult To Insure?

Many auto body shop owners ask, “Why are auto body shops with larger property difficult to insure?” Let’s explore why auto body shops with larger properties are more difficult to insure and what you can do to mitigate these challenges.

Jake’s Auto Repair in Pasadena had grown substantially over the years. Starting as a small garage, Jake had expanded his shop to cover a sprawling property with multiple service bays, a customer waiting area, and a large parking lot filled with vehicles awaiting repairs. While the business growth was exciting, Jake soon found himself facing a new challenge: securing adequate insurance coverage for his larger property. Despite his best efforts, insurance companies seemed hesitant to provide the coverage he needed, and the quotes he received were significantly higher than expected. Jake’s story is not unique, and many auto body shops with larger properties face similar challenges.

Increased Risk Exposure

One of the primary reasons larger properties are more difficult to insure is the increased risk exposure. Larger auto body shops often have more equipment, vehicles, and materials on-site, which increases the potential for accidents, theft, and damage. More space also means more areas that need to be monitored and maintained, which can increase the likelihood of something going wrong.

Higher Risk of Accidents

With more vehicles and equipment on-site, the risk of accidents increases. Employees and customers are at a higher risk of injury, and the chances of damaging expensive equipment or vehicles also go up. Insurers see this increased risk and may be more hesitant to provide coverage or may charge higher premiums to compensate.

Increased Fire Hazard

Larger properties often have more electrical wiring, machinery, and flammable materials, which can increase the risk of fire. Auto body shops, in particular, are susceptible to fires due to the presence of flammable liquids and chemicals. The larger the property, the more challenging it is to implement and maintain effective fire prevention and suppression systems, making insurers wary of providing coverage.

More Comprehensive Coverage Needs

Larger auto body shops require more comprehensive insurance coverage to protect all aspects of the business. This includes not only the building and its contents but also liability coverage for employees and customers, business interruption insurance, and specialized coverage such as garage keepers insurance.

Property Insurance

Larger properties need more extensive property insurance to cover the increased value of the building and its contents. This can include expensive machinery, tools, and vehicles. The higher the value of the insured property, the higher the potential payout for the insurer, which can make them more cautious about providing coverage. For more insights, read our post on What Kind of Property Insurance Do Auto Body Shops Need?

Liability Insurance

With a larger property and more employees and customers on-site, the need for liability insurance also increases. General liability insurance is crucial for covering claims related to bodily injury, property damage, and advertising injury. However, larger properties may require additional liability coverage to adequately protect against the increased risk. For more information, check out our detailed post on What Does General Liability Insurance Cover In My Auto Body Shop?

Business Interruption Insurance

Larger auto body shops are more likely to be affected by business interruptions due to their size and complexity. Business interruption insurance helps cover lost income and ongoing expenses if your business is unable to operate due to a covered event. Insurers may see this as a higher risk and may charge higher premiums or impose stricter policy terms. For more details, read our post on Do Auto Body Shops Need Business Interruption Insurance?

More Stringent Underwriting Requirements

Insuring larger properties often involves more stringent underwriting requirements. Insurers will closely evaluate the property, its operations, and the risk management practices in place. This can make it more difficult to secure coverage, especially if the insurer deems the property to be high-risk.

Detailed Inspections

Insurers may require detailed inspections of the property to assess its condition and identify potential risks. This can include evaluating the building’s structure, electrical systems, fire prevention measures, and security systems. Any deficiencies found during the inspection can result in higher premiums or denial of coverage.

Risk Management Practices

Insurers will also look at the risk management practices you have in place. This includes safety protocols, employee training programs, and maintenance schedules. Demonstrating that you have effective risk management practices can help reassure insurers and potentially lead to better coverage terms.

Higher Premiums and Deductibles

Due to the increased risks and more comprehensive coverage needs, larger properties often come with higher insurance premiums and deductibles. Insurers need to balance the potential payout with the premiums collected, and larger properties present a higher financial risk.

Premium Increases

Larger properties typically face higher premiums due to the increased risk exposure and the potential for larger claims. This can be a significant financial burden for auto body shop owners, but it is necessary to ensure adequate coverage.

Higher Deductibles

To mitigate their own risk, insurers may impose higher deductibles on policies for larger properties. This means that in the event of a claim, you will need to pay more out of pocket before the insurance coverage kicks in. While this can lower your premiums, it also means taking on more financial risk yourself.

How to Mitigate Insurance Challenges for Larger Properties

While insuring larger properties can be challenging, there are steps you can take to make the process easier and secure better coverage terms.

Implement Robust Risk Management Practices

Demonstrating that you have effective risk management practices in place can help reassure insurers. This includes regular maintenance, employee training programs, and implementing safety protocols. The better you can manage and mitigate risks, the more favorable your insurance terms may be.

Invest in Security and Fire Prevention Systems

Investing in high-quality security and fire prevention systems can help reduce the risk of theft and fire, making your property more attractive to insurers. This can include installing surveillance cameras, alarm systems, fire sprinklers, and fire extinguishers.

Work with an Experienced Insurance Broker

An experienced insurance broker, like Second Western, can help you navigate the complexities of insuring larger properties. We can provide valuable advice, help you identify potential risks, and find the best insurance policies to meet your needs. Working with a broker can also help you secure more favorable terms and premiums.

Navigating the Challenges of Insuring Larger Auto Body Shops

Insuring an auto body shop with larger property can be a complex and challenging process due to increased risk exposure, more comprehensive coverage needs, stringent underwriting requirements, and higher premiums and deductibles. However, by implementing robust risk management practices, investing in security and fire prevention systems, and working with an experienced insurance broker, you can mitigate these challenges and secure the necessary coverage to protect your business.

At Second Western Insurance Services, we understand the unique challenges faced by auto body shops with larger properties. Our expert team is here to help you navigate these complexities and find the best insurance solutions for your business. Contact us today to learn more about how we can help you protect your auto body shop and ensure its long-term success.

For more information on related topics, visit our other blog posts:

• What Does Auto Body Shop Insurance Coverage Include?
• Why Do Auto Body Shops Need Workers’ Compensation Insurance?
• Does My Auto Body Shop Need Cyber Liability Insurance?
• What is Directors & Officers Coverage for Auto Body Shops?
• Can My Auto Body Shop Insure the Equipment Against Breakdown?

Second Western Insurance, an independent insurance agency, serves LA County, including Pasadena, Flint Ridge, Montrose, Glendale, Tujunga, and the Foothills region. Our independent insurance agents understand the unique risks auto body shops face and can help you find the best coverage options. Contact Second Western Insurance today to learn more about how they can help protect your business and provide peace of mind.