Property and Casualty Insurance Practice Exam

What does Garage Keepers Insurance primarily cover?

1. Liability for environmental damage caused by garage activities

2. Damage to the insured’s property in a garage

3. Liability for damage to customers' property while serviced or stored

4. Accidental injuries occurring in the garage premises

The correct answer is: Liability for damage to customers' property while serviced or stored

Garage Keepers Insurance is designed to provide coverage specifically for damage to customers' vehicles or property while they are in the care, custody, or control of a garage operator. This insurance is essential for auto repair shops, parking lots, and similar businesses because it protects against losses that can occur to customer property due to various risks such as theft, vandalism, fire, or accidental damage while the property is being serviced or stored. This coverage is critical for garage operators because it helps mitigate the financial risks associated with potentially high costs of repairing or replacing a customer's vehicle that is damaged while in their possession. The policy not only gives peace of mind to the business owner but also assures customers that their property is protected while in the garage's care, thus fostering trust and loyalty. The other options focus on different types of coverage that are not the primary focus of Garage Keepers Insurance. For example, liability for environmental damage pertains to a different category of insurance focused on pollution risks, while coverage for the insured's property is typically under a property insurance policy rather than Garage Keepers. Accidental injuries occurring on the premises would be covered under general liability insurance, which is separate from the specialized coverage offered by Garage Keepers Insurance.