Are you an entrepreneur who’s also a car enthusiast? If yes, you can make a huge profit buying used cars, repairing or modifying them, and selling them at a higher price—it’s called an auto fix and flip business. But just like any business, you need insurance to provide coverage for unexpected events. You may need more than one type of insurance for fixing cars jobs. So what insurance do you need for an auto fix and flip business? Find out more below.
What is an Auto Fix and Flip Business?
An auto fix and flip business, also known as an automotive flipping business, involves buying used cars, repairing or refurbishing them, then selling them for profit. It’s one of the most profitable fixing cars jobs in the automotive industry. The business takes a similar concept to the common real estate fix and flip business, just that it focuses on automobiles instead of houses.
So, you’ll find a vehicle that needs repairs or restoration, negotiate a purchase price with the owner, get the necessary parts and materials like a truck bed cover, and fix the vehicle. The goal is to improve the vehicle’s overall condition so that you can sell it at a higher price. Remember, you need adequate knowledge and experience in the automotive business to run a successful auto fix and flip business.
Additionally, it’s essential to understand the requirements and regulations of these fixing cars jobs, which vary based on your jurisdiction. For instance, most jurisdictions require a dealer’s license and insurance for this business.
What Insurance Do You Need For an Auto Fix and Flip Business?
Any serious entrepreneur or business owner knows the importance of having insurance for their business, especially if it entails fixing cars jobs. However, some only recognize the importance when a disaster occurs, such as fire, damaging their properties. However, you need to protect yourself and your business by getting the right insurance. There are several types of insurance you may want to consider for an auto fix and flip business, including;
General Liability Insurance
General liability insurance is an essential coverage type for fixing cars jobs, or businesses like auto fix and flip. This type of insurance protects your business against accidental injuries and property damage caused to others. General liability insurance is sometimes referred to as “commercial general liability” or “business liability insurance.” But why do you need this type of insurance for your auto fix and flip business?
Fixing cars jobs like fix and flip business may cause damage to third-party property. For instance, when test-driving a used golf car you intend to sell, you may get into an accident and damage another person’s property. If you don’t have general liability insurance, you’ll be forced to pay for the damages out of pocket. Otherwise, general liability insurance can help cover the costs linked to third-party property damage claims.
Moreover, if someone gets injured on your business premises or as a result of your business activities, you’ll take liability. This may involve a customer or employee slipping and falling in one of your motorcycle stores and sustaining injuries. In this case, general liability insurance will cover all expenses and liabilities, including legal fees, medical expenses, and potential settlements arising from the claims.
Also, general liability insurance coverage extends to the customer, even after you’ve sealed a deal and sold the vehicle. For instance, you have repairable salvage trucks for sale at your shop: a customer buys a truck and, unfortunately, gets involved in an accident due to a repair-related problem. Since you’re the one who did the repairs, your business will be held liable, and you’ll have to pay for any damages. General liability insurance comes in handy in such a situation.
Garage Liability Insurance
If you’re involved in fixing cars jobs or any other business in the automotive industry, you must have garage liability insurance. This type of umbrella policy will offer coverage for the day-to-day operations of your auto fix and flip business. It’s excellent coverage for automobile dealerships, tow-truck operators, parking lots or parking garage operators, customization and repair shops, and service stations. So why do you need garage liability insurance for your auto fix and flip business?
First, garage liability insurance adds a layer of protection to your business’ general liability policy. It covers property damage and bodily injury from direct garage operation. This includes damage to your customer vehicles. For instance, a customer buys a vehicle, pays for it, but doesn’t pick up the car immediately. If the vehicle gets damaged while still in your garage, garage liability insurance will pay for the repairs or replacement.
There’s a difference between garagekeepers insurance and garage liability insurance discussed above. However, both types of insurance are essential for an auto fix and flip business or other fixing cars jobs. If you’re in the ” cash for junk car business,” you’ll definitely need garagekeepers insurance. So what does this type of insurance cover, and why do you need it for your auto fix and flip business?
Garagekeepers insurance covers your customer’s cars while in your care. For instance, a customer could buy one of your hydrovac trucks, but someone steals it before they take it home. In this case, you’ll have to give the customer another truck. If you have garagekeepers insurance, the policy will cover the cost of this replacement. If not, you’ll have to pay it out of pocket.
Some of the risks covered by garagekeepers insurance include fire, accidental damage like collision, theft, severe damage such as hail or wind, and vandalism. With this type of insurance, you have multiple options to cover your customer’s vehicles, including legal liability, per-occurrence limit, and per-vehicle deductible. For instance, if you or your employee causes damage to your client’s vehicle, such as a cracked windshield, while performing a heavy duty repair, garagekeepers legal liability will cover the damages.
However, it’s important to note some exclusions in this type of insurance. For instance, the insurance may not cover theft by you or your employees, contents of your customer’s car like items in the trunk, damage caused by war, and stereo equipment that’s not installed permanently.
A typical garagekeepers insurance policy costs between $1000 and $1300 per year. The costs vary based on factors such as your business location, revenue, types of vehicles you sell/service, and the number of vehicles you keep on-site.
Business Auto Insurance
You’ll definitely have vehicles for your business, such as a junk hauler truck for hauling away the vehicles you buy. These vehicles will either be used by you or your employees. Therefore, you’ll need a specific type of insurance to protect these vehicles while they are helping you with your business operations. This is where business auto insurance comes into play. This type of insurance offers coverage for property damage or bodily injury to you, your employees, or commercial vehicles.
Business auto insurance works similarly to your personal car insurance policy. The only difference is that commercial vehicle insurance only covers your business vehicles, such as delivery vans, company cars, and trucks. Your business auto insurance will provide coverage if you or your employees cause an accident leading to injuries and legal liabilities. The policy will pay for all the medical expenses, legal liabilities, repairs, or replacements needed.
However, if you use your personal or rental cars for work, you won’t get coverage from business auto insurance. Moreover, the policy doesn’t cover customer vehicles. According to Insureon, business auto insurance will cost you roughly $147 monthly. But the cost could vary based on multiple factors like business size, driving risks, type and number of vehicles your business has, and employee driving records.
Commercial Property Insurance
You’ll definitely have a physical location for your auto fix and flip business, whether an office, garage, or vehicle store. For this reason, you’ll need commercial property insurance, regardless of whether you own or lease your business premises. Commercial property insurance covers the loss or damage of physical assets your business owns, such as buildings, equipment, and office.
The policy covers your business premises against perils like theft, fire, and natural disaster. It covers the building’s structure, roof, walls, and fixtures. For instance, if strong winds damage your building’s roof, the insurance will cover the costs of roof repairs or replacements.
Additionally, this insurance covers the contents of your business premise, such as machinery, equipment, and inventory. For instance, it covers your vehicles against loss or damage due to fire, theft, or severe weather conditions. Commercial property insurance eliminates business disruptions that may stem from perils like theft and fire.
According to Insureon, you’ll have to cough up roughly $63 in monthly premiums for commercial property insurance. However, the cost varies based on factors like your business location, size of business premises, safety and security, and age of your buildings, among others. You can minimize the costs by paying the annual premium, bundling policies, or managing risks.
Workers’ Compensation Policy
While some of the insurance policies discussed above may be optional for your auto fix and flip business, this one may be mandatory, depending on your jurisdiction. If you have employees, you may be required by law to obtain a workers’ compensation policy. This type of insurance provides cash benefits and medical care for workers who become ill or are injured while performing their job roles. So why is a workers’ compensation policy ideal for fixing cars jobs?
First, it’s a legal requirement—nearly all U.S. states require businesses that have employees to have workers’ compensation policies. Although the specific requirements vary by jurisdiction, all employers are typically required to provide coverage to their employees.
This type of insurance covers medical expenses incurred by employees who are injured or become ill due to their work, like when performing a diesel engine repair. This may include costs associated with doctor visits, hospitalizations, surgeries, medication, rehabilitation, and other necessary medical treatments.
Also, if an employee is unable to work due to work-related illness or injury, workers’ compensation insurance offers wage replacement benefits. This usually covers a portion of the employee’s lost wages during the period of disability or until they resume work. It’s worth noting that as an employer, you’re fully responsible for paying the workers’ compensation insurance premiums—your employees won’t contribute even a cent to this type of insurance.
In the U.S., small businesses pay approximately $45 monthly for workers’ compensation insurance. However, the cost can vary depending on factors like your business location, number of employees, and industry risks. The more the employees and risks, the more you’ll pay for these policies.
Insurance Tips For Your Auto Fix and Flip Business
There are various types of insurance policies you can get for your auto fix and flip business (some we’ve not mentioned above). However, insurance is like an expense to your business because you pay monthly premiums. Sometimes, you may never get to utilize the coverage. Therefore, business insurance requires careful planning and consideration. Here are a few tips to help you navigate the whole process.
Understand Your Business Needs
You should understand that every business is different. Also, you don’t need all the insurance policies discussed above—except those required by law. So before getting any type of insurance for your auto fix and flip business, assess your business risks. This will help you determine the right type and level of insurance you need.
Work With an Insurance Professional
Insurance can be complex at times. Therefore, you should seek help from experienced insurance professionals or brokers. You can also get legal advice from the best tax attorney in your region.
Review Policy Coverage and Exclusions
Ensure you go through all the terms and conditions of the insurance policies before agreeing to the deal. Understand coverage limits, deductibles, exclusions, and other additional endorsements or optional coverages that may be available.
Are you thinking of starting an auto fix and flip business or other fixing cars jobs? You must ensure you get the right insurance coverage to protect yourself, your business, employees, customers, and property against various liabilities and damages. Some essential policies include workers’ compensation insurance, general liability insurance, and business auto insurance. If you have any questions about business insurance, feel free to leave us a message.