Finding the Right Insurance

Jan. 1, 2020

Everybody needs business insurance, but it can be difficult to calibrate coverage to your operation. Here is a rundown of the different options and considerations.

There’s insurance for everything—your home, your car, your health, even your life—and is critical to have for any surprises that may arise. This is no different for your business.

“Insurance is a strange thing; it’s one of the few things we pay for and then hope we never use,” Dan Tharp, vice president of business insurance at Pearl Insurance. “It’s critical; not only to protect the finances and assets of the operator, but also to protect the employees and ultimately the customers.” 

When it comes to choosing the right insurance, however, it can become a bit confusing. 

Do I have too much?

Do I not have enough?

What is the best coverage to go with?

Do I need an agent for help?

To answer your most pressing questions, NOLN held a Q&A with Tharp. 

What type of insurance coverage is out there for quick lubes?

There are roughly six different coverages at which each shop needs to take a strong look. The first of which is general liability, which is going to cover the premise of liability. A quick lube tends to have very slippery surfaces on the floor from oil and spills, where a customer or an employee could slip and fall. There’s also completed operations, where, if a customer comes in and gets an oil change and comes back tomorrow saying, “Hey, my engine blew up because you didn’t do XYZ correctly,” and that’s going to protect the business as well. And lastly there is product liability, and that’s that the product that a customer used caused damage to their goods. All three of these are covered under the general liability contract.

The next one that they must have is garage keepers liability; that’s different from the general liability. This one covers the assets of the customer and the vehicle of the customer when it’s in their care, custody, or control. During the time that they have it, they are responsible for that vehicle from a liability and a physical damage standpoint. It’s imperative that they have the proper coverage.

We then have property insurance at which we have to look. We have to insure the building itself and the structure, the equipment, the tools—not just the garage tools, but the employee’s tools.

Also worker’s compensation, obviously, which is mandated by most states, so this is actually a legal requirement. They are going to have to check the laws within their particular state to determine whether or not they are required to carry worker’s compensation and take action dependent on that.

What areas of coverage are most overlooked?

One coverage that most garages and even agents overlook is called hired and non-owned, and what this refers to is coverage for vehicles that are used in the business that are not owned by the business. Here’s an example: the shop has to pick up something, so the owner asks an employee to go pick it up in their own vehicle. If that employee gets into an accident with their own vehicle, that employee is going to get drawn into that lawsuit—the business will get drawn into it, as well as the employee—so it’s imperative that they have this coverage to cover those rare, maybe often, circumstances when an employee is using their vehicle for customer business.

Does insurance coverage change as a business grows?

I would say the last one they need to look at is crime coverage. This might be for when the shop grows or increases and they tend to have more cash or things of value on hand. It is not added automatically to policies, so you have to look and make sure you have the right limits for how much cash you might have, and that’s for vandalism, theft, somebody breaking in—very much like it sounds.

What is the best process behind choosing the right insurance for your business?

It’s critical to work with an agent or agency that is very experienced in dealing with garage exposures. Not just one that personal insurance or that covers their home, but they need to deal with an agency that deals specifically with garage exposures. There are a lot of things within the garage marketplace that many agents don’t know about, including employee-owned tools, the hired and non-owned coverage, for example. Within the insurance coverages, there are myriad limits and sub-limits that need to be weighed and measured, and that’s where the experience of the agent comes in.

They are going to want to ask the agent specifically, “How many garages do you insure currently?” Find out what that agent’s knowledge and expertise is in the realm of dealing with garages. The other thing to look at is the educational knowledge of the agent. One of the real things to look for is a designation after the agent’s name called CIC, which stands for a certified insurance counselor. 

Those agents have to have continuing education—20 to 30 hours—every single year to keep that designation. What this means for the garage owner is that this is somebody that is dedicated to the industry and is continuing to increase their knowledge every year about the industry.

A good way to seek out those agents might be to talk to an association or a group they belong to. Many of those have endorsements that work with specific agents that are very experienced in dealing with shops exactly like theirs.

How do you evaluate if your current insurance isn’t cutting it?

The operator needs to ask themselves critical questions. One, “Do I truly understand the coverage I have?” If they do not understand, they need to seek out a new agent, because that agent should have been presenting it in a manner that they are not purchasing something they don’t understand.

Another question they need to ask themselves is, “Do I see my agent on an annual basis?”

In other words, is the agent coming in and looking at how their business has grown, if their revenue has increased, what their employee count is, if they have more inventory on hand than they had last year? The agent should come in and review all of this on an annual basis to make sure that they are actually paying for what they have.