A local bike shop is a great resource for clients to learn about bikes, safe riding, and popular bike routes. In addition, a shop may buy, sell, repair, repaint, or make custom bike frames, offering a wide variety of services to their clients.

Insurance is essential for a bike shop because it protects the bike shop owners from financial hardships if an accident happens. For example, faulty repairs or selling a defective bike could lead to customer injury, resulting in a liability claim against the shop. Insurance offers financial protection for those claims while also covering damage and loss to the store and its inventory.

Related: How to start a bike shop

What Are Some Risks for a Bike Shop?

A bike shop may be exposed to some of these risks:

• Selling defective bikes or providing faulty repairs
• A customer is injured on the property
• Employee injured on the job
• Extended store closure
• Fire damage or theft

This list is a small sample of the types of risks a bike shop is exposed to. However, it shows how important insurance is to protect the business from a costly lawsuit if an accident or loss occurs.

Defective Bikes and Faulty Repairs

A significant risk to the business is providing a defective bike. This could happen from a recall or if the shop provides faulty repair services. Bike parts that are not correctly welded may fall off while a customer is riding the bicycle, resulting in injuries. Typically, in a recall or sale of a defective bike, the manufacturer is liable for the damages; however, a shop could also be held responsible as a co-defendant.

Customer Injuries on the Property

A customer test-riding a bike before purchasing is typical. Unfortunately, an accidental injury can happen during a test ride, particularly with children. Precautions help prevent injuries—such as wearing helmets and only allowing bike riding in a designated area. Additionally, customer injuries can result from falling wall-mounted bikes because they are not adequately secured.

Employee Injuries

Some of the more common employee injuries include falls, cuts from sharp tools, back injuries from lifting, and shocks from electrical equipment. Shops that provide bike repairs, which involve welding and painting, increase the risk of a work-related employee injury. Good ventilation and protective gear are essential to promote workplace safety while repairs are made.

Extended Closure

Several hazards could lead to an extended closure of a bike shop. For example, a large fire may require the shop to be rebuilt and lost inventory to be re-purchased. These repairs take time to complete, and the shop may have to relocate for a time. Since the bike shop relies on customers for income, an extended closure risks significant financial loss, especially during a peak season.

Fire Damage and Theft

As mentioned above, fire is a risk to the bike shop. A fire can start from faulty wiring, welding equipment, or smoking, leading to a loss of the building, inventory, and the opportunity to maintain an open store. The bicycle store’s merchandise is also at risk of theft and vandalism damage because bikes and associated retail are targets for shoplifters.

What Types of Business Insurance Should a Bike Shop Consider?

Although a bike shop is exposed to a handful of risks, insurance policies can cover these various exposures. Each business has different insurance needs, meaning that insurance for a bike shop will look different than an insurance package on a coffee shop down the block. So, what does a bike shop need?

A bike shop should consider the following policies:

• General liability insurance – products and completed operations
• General liability insurance – premises and operations
• Workers’ compensation insurance
• Business interruption insurance
• Property damage insurance

General Liability Insurance – Products and Completed Operations

General liability for products and completed operations is an insurance policy that covers

1) Liability claims arising from the products sold or rented

2) Repairs, accidental damage, or custom alterations performed by the bike shop

Bodily injury or property damage claims can result from accidents because of the shop’s negligence. For example, injuries happen because of a defective bike sold to a customer or a repair job went sideways. Liability insurance will cover these types of claims.

A general liability policy covers payments for legal expenses, settlements, medical expenses, and property damage repairs to the customer. Without liability insurance, the bike shop would be responsible for these expenses, which can be costly—especially since medical payments and ongoing care quickly add up.

General Liability Insurance – Premises and Operations

A general liability policy for the premises is a line of insurance coverage that protects the bike shop against bodily injury and property damage claims for accidents on the property or because of the shop’s operations.

Although this policy differs from general liability for products, it is often combined into one policy. This type of liability insurance covers claims from third-party injuries on business property. Some expenses include:

• Medical payments
• Legal defense costs
• Settlements
• Property damage repairs
• Injuries from organized group rides

A bike shop can help to prevent claims by keeping the workplace tidy and properly securing shelves, bikes, and mounted equipment. Additionally, for any hosted events such as races, tours, or bike rentals, the shop should thoroughly inspect the bikes, provide instructions, and have the customer sign a contract.

Workers’ Compensation Insurance

Work-related injuries can prove to be expensive for an employee. For example, an injury might incur medical costs and prevent the employee from returning to work for a time. A workers’ compensation policy helps to cover the cost of employee-related injuries.

Common benefits of a workers’ compensation policy include:

• Medical payments
• Ongoing rehabilitation care
• Lost wages
• Funeral expenses
• Disability expenses

A bike shop with repair services that include welding and painting is at an increased risk of employee injury. Good ventilation will help reduce the fumes from paints and solvents, and safety equipment is worn while welding can prevent skin burns and eye damage. The bike shop should consider carrying a workers’ compensation policy to protect its employees and protect the business from potential lawsuits.

Business Interruption Insurance

When a bike shop is closed for repairs following a hazard (fire, wind damage, or water damage), they cannot sell and repair bikes. Therefore, an extended closure risks a significant loss of valuable income.

Business interruption coverage isn’t sold as a stand-alone policy; instead, it’s added to an insurance policy package. Some benefits of business interruption coverage include the following:

• Payment on standing bills and loans
• Replacement of lost income
• Temporary relocation costs
• Employee wage coverage
• Coverage for extra expenses associated with the loss

Property Damage Insurance

Due to a covered loss, a property damage policy offers coverage for the shop’s structure, inventory, and equipment. This line of coverage is often included with a general liability policy. Some examples of a covered loss include fire, theft, vandalism, and wind and hail damage. These perils can result in costly repairs to the bike shop; however, a property damage policy offers coverage for rebuilding and replacing.

Replacing the inventory and equipment can be covered at different levels:

• Actual cash value
• Agreed value
• Replacement cost value

The first option is the lower level of the three options and pays the value of lost items minus depreciation. On the other hand, a replacement cost policy pays the amount it costs to replace the inventory and equipment with like kind and quality items.

How Much Does Insurance Cost for a Bike Shop?

The cost of a business owner’s policy varies depending on the size of your business and the amount of risk you are exposed to. As such, a bike shop with many customers, vendors, and deliveries needs a sizable insurance policy. Also, shops that offer multiple services such as sales, rentals, repairs, tours, and races need well-rounded insurance policies to protect their liability and loss risks. In comparison, a smaller shop with fewer services may not need as much coverage.

Some factors that influence the cost of your insurance policy include:

• The size of the bike shop
• The age and quality of the building
• The amount of inventory on hand
• The number of employees on staff
• Does the store provide welding and painting services?
• Does the store offer bike rentals?
• Are the racks, shelves, and merchandise properly secured?

The best way to figure out the insurance cost is to call several companies to receive a quote. A good bike shop insurance policy package will cover all your liability and loss risks with adequate coverage limits, giving you peace of mind that an accident won’t become a financial burden.

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