On the surface, it might appear as if operating your own mobile or fixed-site auto detailing business would be a piece of cake. Buy some equipment, stock up on some auto detail products from Detail King, and hit the road looking for car-owning prospects.
But here’s where we remind you that your new enterprise is a bona fide business undertaking — a venture that should include the appropriate amounts of planning, troubleshooting and an entire notebook page full of “what ifs.” And chief among those considerations should be insurance.
We know. We’ve heard it before. “Nothing’s going to happen,” you say. “It’s such a small business — I don’t need insurance,” you reason. “Insurance will just eat up my profits,” you claim.
Truth of the matter is, one of the first things you should be looking at — maybe even before picking out a rotary buffer and an orbital polisher — is business insurance. And that’s particularly important when you consider you’re working daily with other people’s property.
What we offer below is information on the three basic insurance components for an auto-detailing business — general liability insurance, garage keepers insurance (fixed-site location), business interruption insurance, and workman’s compensation insurance.
General Liability Insurance
A part of the general insurance system of risk financing is to protect you from the inherent risks of liabilities imposed by lawsuits and similar claims. Among a laundry list of other potential mishaps, this coverage protects your auto detailing customers in the event one of them is injured by a piece of equipment on your property or even in the case that a customer trips on a cord or hose and falls down and is injured while you’re doing work for them. You should look for coverage quotes in the $500,000 to $1 million range, which covers general liability in those amounts for your shop and/or mobile operation.
While you’re at it, inquire about an “umbrella” policy that can help you obtain lower rates and provide a wider range of coverage. And you’re certainly not wasting time obtaining two or three quotes from various carriers — in fact, do that every couple of years to make sure you’re still getting the best rates.
Garage Keepers Legal Liability Insurance
For those operating a fixed-location auto detailing business, you should ask your insurance agent about Garage Keepers Insurance. Here, you want to look for coverage in the $50,000 to $100,000 range for damage to your customer’s vehicles during the time they are in your possession. In addition, coverage should include theft, fire and movement of the vehicles and/or delivery.
Here, if you do experience the occasional small claim along the way, it may be far better to shell out the money yourself. Turning small claims in to your insurance carrier may result in a higher premium.
Here are some more things to keep in mind when seeking general liability insurance:
- If your operation provides pick-up and delivery of customer’s vehicles, a clean driving record keeps premiums low.
- Same thing goes for your employees. Before hiring anyone, make sure their driver’s license isn’t suspended, revoked or chock full of points. This can also affect your insurance rates.
Monthly insurance premiums for a mobile auto detailing business with $500,000 of general liability insurance and $75,000 in Garage Keepers coverage is around $125 per month based on the principle owner having a good driving record. If you are going to use your personal vehicle as your “mobile rig,” you may have to have your policy upgraded to a Commercial policy and that is where “umbrella” coverage could help defray the costs.
Business Interruption Insurance
Business interruption insurance (a.k.a. business income insurance) covers the loss of income that a business suffers after a disaster while its facility is being rebuilt. If you carry this type of insurance and your auto detailing location is hit by flood, fire or other event that prevents you from working out of the insured location, your expenses are typically for 60 to 90 days.
Workman’s Compensation Insurance
Workers’ compensation is a form of insurance providing wage replacement and medical benefits to employees injured in the course of employment in exchange for mandatory relinquishment of the employee’s right to sue you for negligence. While the cost of workman’s compensation insurance is based on the type of business you run and the number of people you employ, it’s wise to budget on average between $50-$100 per employee per month for coverage. Workman’s comp can typically be purchased from the state in which you do business. And if your business is primarily detailing cars, your business should be rated under the classification of “auto laundry.” Just make sure the insurance doesn’t rate you as “auto service,” because your premium will typically be much higher under that type of classification. And as with all other forms of insurance, any claims made could increase the premium.
One final recommendation: Regardless of which type insurance you carry for your auto detailing business, be sure the insurance carrier is first and foremost a “rated” carrier by a credit rating agency dedicated to serving the insurance industry. For example, A.M. Best’s Credit Ratings are independent opinions regarding the creditworthiness of an issuer, and you want to look for an A.M. Best rated “A” (A, A-, A+) carrier for your auto detailing business coverage.