What Types of Insurance Do Oil Change Centers Need?
The average car owner finds themselves needing an oil change twice a year—sometimes even more. Oil change centers attend to many customers and often offer extra services like air filter changes, windshield wiper changes, or tire rotations.
A high volume of customers plus the variety of services offered can increase the risk of liability exposure. But, there are insurance policies to cover the business’s exposures. Although oil spills, damage to a customer’s vehicle, and faulty work are all possibilities, a good insurance policy will help protect the business from financial loss.
What Are Some Risks for an Oil Change Center?
Some risks that oil change centers have are:
- Faulty work on a customer’s vehicle
- Employee injuries
- Fire damages
- Damage and wear on expensive equipment
- Oil spills and pollution
Arguably the biggest risk that an oil change center may face is completing defective work. Missing a crucial step in an oil change can be costly. For example, an oil cap that is not screwed on completely will leak out the oil resulting in engine failure.
Installing broken or defective parts can lead to property damage or result in car accidents. Proper training will help reduce these types of claims, but insurance is as important as training.
In this industry, employees work with heavy machinery and a variety of tools throughout normal operations. Equipment that creates an electrical shock is a hazard to employees. Tools and equipment should be regularly maintained, and old equipment should be replaced to reduce these kinds of risks.
The tools, machinery, and car fluids are various factors that lead to employee injury. Trips and falls are common when conditions are slippery or cluttered. Keeping a clean and organized workspace helps reduce employee injury claims.
Fire is a hazard to the building and equipment on-site. Some causes of fire include:
- Ignition from tools
- Combustible fluids
- Faulty wiring
In an oil change center, there are many tools that can cause ignition and lead to a fire if a flammable object nearby catches a spark. A fire can also be started from a faulty wire if the building is aged or a tool has a damaged or frayed cord. Also, oil change centers use and store combustible fluids like motor oil, gasoline, and antifreeze, which are all risks to fire.
Expensive tools, lifts, and employee-owned tools need to be insured. Damaged and stolen equipment is costly to replace, and items moved between locations are at a higher risk of being damaged, lost, or stolen.
Oil Spills and Pollution
Fluid waste is produced daily in an oil change center. Motor oils, brake fluid, and antifreeze are a hazard to the environment if they are spilled or not correctly disposed of. Accumulation of tires, parts, and trash—although not hazardous materials—need to be appropriately disposed of.
Hydraulic lifts present a potential environmental hazard. The lift is powered by pumping hydraulic fluid through pipes. Sometimes these pipes run underground, and they are at risk of deterioration. If deterioration happens, they may leak fluid, thereby creating an environmental hazard.
Types of Business Insurance an Oil Change Center Should Consider
The insurance policies an oil change center should consider are:
- General liability insurance – products and completed operations
- Workers’ compensation insurance
- Commercial property insurance
- Inland marine insurance
- Environmental impairment liability insurance
General Liability Insurance – Products and Completed Operations
General liability covers claims that arise due to defective work completed by the oil change center. Liability insurance coverage includes:
- Damages to the customer’s vehicles
- Liability claims for accidents that are a direct result of faulty work
- Legal fees
The biggest risk that an oil change center faces is a liability claim for faulty work. A technician who doesn’t replace enough oil in the engine or properly tighten the oil cap may cause extensive damage to the customer’s car.
The engine can fail without enough oil or if it loses oil from a leak. Aside from the risk of engine damage, accidents can occur on the road if the engine gives out due to a lack of oil. The liability risk here is huge because the oil change center will be responsible for the failed engine and any related accident claims.
Further, defective parts can also lead to a liability claim. Whether the parts came defective from the manufacturer or became defective because of the technician, the business should have a general liability policy to cover the potential exposure.
How Much Does a General Liability Policy Cost?
The average small business can expect a general liability policy to cost between $400 – $1,000 annually.
Workers’ Compensation Insurance
A workers’ compensation policy covers expenses for employees due to a work-related injury. The policy offers coverage for:
- Medical bills
- Lost wages
- Funeral costs
Commonly, slips, trips, and falls are what instigates a workers’ compensation claim. Slippery and cluttered floors increase the risk of falls. In some oil change centers, an underground workspace for mechanics presents an increased risk of fall injuries. These areas should be covered with netting to prevent falls into the underground workspace.
Moving equipment and heavy machinery (like a lift) can cause cuts, dismemberments, and crushed bones. Further, toxic fumes from chemicals or exhaust can cause employee injury. Proper ventilation is an essential safety measure to maintain good air quality.
The first step in avoiding a claim is with training and enforcing safety measures. But, workers’ compensation helps provide coverage for injuries when accidents do occur.
How Much Does Workers’ Compensation Cost?
A workers’ compensation insurance policy will vary depending on the number of employees and the payroll. A business can expect to pay between $400 – $800 per year.
Commercial Property Insurance
Commercial property insurance offers coverage for the structure and items owned by the business in the event of a covered loss. Covered losses are events such as fire, theft, water damage from leaking pipes, and vandalism. Fire is the biggest risk to an oil change center.
The property insurance policy covers the cost to replace and repair damaged structures and equipment. Since the equipment used in an oil change center can spark and cause a fire, it is important to have a fire suppression system.
How Much Does a Commercial Property Insurance Policy Cost?
An average business will pay about $1,000 – $3,000 annually for property insurance. The size of the building and any specialty equipment can raise the cost of the policy since they are more expensive to replace.
Inland Marine Insurance
An inland marine policy sounds like it should cover boats. It is actually a policy that has nothing to do with water or boats. Rather, it covers property owned by the business, such as equipment and inventory. An inland marine policy offers two types of coverages that are especially relevant for oil change centers.
- Equipment Floater
An equipment floater offers coverage for equipment—particularly high-value equipment that is expensive or difficult to replace. The equipment floater follows the items wherever they go. If the equipment is transported between locations or to a customer’s location, the inland marine policy insures those items.
- Employee Tool Coverage
Many places may require a technician to use their own tools. A commercial property insurance policy does not cover employee tools because those tools don’t belong to the business. Instead, the tools can be covered under an inland marine policy while the tools are stored on the premises.
The most common reason that employee tool coverage is needed is that expensive tools are often targets for theft.
The inland marine policy covers the cost to replace lost or damaged equipment and employee tools.
How Much Does an Inland Marine Insurance Policy Cost?
An inland marine policy rate is based on the amount of coverage on the policy and the deductible. With a policy limit of $100,000, an estimated annual premium is about $740.
Environmental Impairment Insurance
An environmental impairment insurance policy is sometimes referred to as a pollution policy. It protects the business from financial losses arising from pollution lawsuits. The oil center uses hazardous liquids like motor oil, antifreeze, and brake fluid. If these substances spill, leak, or catch fire, they can cause problems to the environment.
Additionally, the oil change center can be held responsible for not properly disposing of the hazardous materials. Any contracted recycling company should be vetted to make sure they dispose of the materials correctly so that any claims cannot come back to the oil change center.
In the event of a claim, the environmental impairment policy will cover the cost of:
- Legal fees
- Clean-up expenses
How Much Does an Environmental Impairment Policy Cost?
A business can expect to pay between $1,280 – $1,900 per year for a policy amount of $1,000,000 per incident.
How Much Does Oil Change Business Insurance Cost?
Since many car owners don’t change their own oil, an oil change center provides an easy and convenient solution. Although the business can take measures to control losses and damages, accidents do happen.
In the case where an accident occurs, insurance is the best way to protect the business from financial hardships. An oil change center should consider a well-rounded insurance portfolio to shield business owners from expensive repairs and lawsuits.
A rundown of the annual costs for a Business Owner’s Policy (BOP) is as follows:
- General liability – $400 – $1,000
- Workers’ compensation – $400 – $800
- Commercial property insurance – $1,000 – $3,000
- Inland marine insurance – $740
- Environmental impairment liability – $1,280 – $1,900
In all, an oil change center can expect a premium between $3,800 and $7,500 per year for business insurance.
A related insurance policy for oil change centers that also repairs vehicles and garage liability insurance (also referred to as garagekeepers) may provide the proper coverage for your business.