Working out which type of business insurance you need for the motor trade can drive you nuts.
Policies can come in packages offering several levels of cover or as specialist insurance to deal with a specific risk.
The motor trade not only has to worry about special risks, but has the same exposure as any other business to public liability and employer liability, plus protection for buildings and contents, which are often of high value.
If you are unsure which type of motor trade insurance you need, read on for an explanation of the different policies and how they work.
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How Motor Trade Insurance Works
Motor trade insurance follows the template of standard car insurance, which means policies come as third party, third party fire and theft or comprehensive.
The same legal requirements apply to insuring vehicles driven on the road – ie they must have at least third party insurance.
Next comes a wide range of policies designed to guard against risk.
The most basic is road risk insurance.
Road risk insurance
This cover is most suitable for part-time motor traders who drive vehicles that they don’t own.
This is the cheapest motor trade insurance with the lowest level of cover when taken out as a third party policy. The cover allows traders to move vehicles on the road legally, but unlike standard motor policies, only accepts claims for the trade value of a vehicle rather than market value.
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Combined motor trade insurance
Combined motor trade insurance offers road risk cover, other common business policies, like buildings and contents, money kept on site, and business interruption cover. The policy can also link with other motor trade specific cover.
Like commercial combined cover for businesses, combined motor trade insurance is a tailored one-stop package that offers custom cover, a single premium and a single renewal date to ease administration.
Vehicle sales cover
Vehicle sales cover includes demonstration insurance, which is vital for any motor trade business as the policy covers customers test driving vehicles. Many part-time traders buy road risk plus demonstration cover as a minimum for selling cars.
Combined vehicle sales allows traders with their own premises to cover the buildings, and with vehicle stock cover for motors kept on site. If your business offers repairs, the policy can expand to offer more comprehensive insurance with product liability and cover for tools and equipment.
For vehicles towed or moved on a flatbed, add carriage of vehicles cover.
Vehicle recovery insurance
If you recover customer vehicles you need carriage of vehicles insurance that covers the cost of damage to any transported vehicles. That’s because even comprehensive standard motor insurance only protects the recovery vehicle, not the transported vehicle.
You might want to consider adding public liability insurance, which covers against the transported vehicle injuring someone or damaging property.
Working On A Customer’s Car
Motor traders not only buy and sell cars, but repair and maintain them as well.
Suppose you fix cars or specialise in changing tyres, batteries and exhausts, for instance, but don’t sell vehicles. In that case, you need a mechanics policy that includes cover for tools, product liability and probably employer and public liability.
Product liability for mechanics is cover for paying compensation if a repair goes wrong.
If you offer a mobile service from the back of a van, you still need cover for tools and machinery, goods in transit and money kept on site.
Liability Insurance For Motor Traders
Public liability covers the cost of compensating someone injured or property damaged due to your business activities. This is an optional cover for motor traders working from premises or running a mobile business.
Product liability covers compensation costs for someone who suffers injury or property damage due to a faulty product supplied by your business. Again, the cover is optional and designed for working from a premise and mobile motor traders.
Even non-maintenance businesses, like car sales and valets, should consider product liability insurance in case something goes wrong with a vehicle once it has driven off the forecourt.
Every motor trade business with employees must take out employer liability cover by law. Employer liability settles compensation claims should someone who works for you fall ill, suffer injury, or damage property due to their employment.
Business Insurances For Motor Traders
Although motor trade insurance comes with a broad range of cover depending on the type of business you run, some standard business policies may apply as well.
Besides buildings and continents cover to protect trade premises, office and garage equipment and stock, you might want to consider:
Business interruption
This cover steps in to save the day if you have an incident that stops your business trading, like a fire, flood or major theft of computer equipment or stock vehicles. The cover allows you to set up and equip temporary business premises.
Goods and money in transit
Similar policies that protect vehicles or parts on the road – and any money customers pay for them – from theft, loss or damage.
Motor Trade Insurance FAQ
Road risk insurance covers motor traders who drive vehicles they don’t own, including those in stock. Third-party road risk cover is the minimum cover a trader must have by law.
The minimum age for cover varies between providers, but most won’t accept customers under the age of 23 if you work in servicing or repairing, and many set the bar at 25 years old.
Trade plates are a badge that a vehicle is in use by the motor trade and allow traders to drive the vehicle on a road without registering for tax. Vehicles must be roadworthy if you take them on a road with trade plates.
Apply to the DVLA for a six month (£90.75) or 12 month (£165) motor trade licence. Traders can apply for cheaper motorcycle or tricycle plates that cannot be used on cars or vans.
You need to complete a Form VTL 301 for a first-time application or a VTL 318 for renewing trade plates. Both applications need accompanying proof of motor trade insurance.
The DVLA decides if you are a motor trader and places you into certain business types:
– Dealers, makers and repairers of vehicles, including those involved in collection and delivery, like car jockeys
– Trailer makers
– Valets and accessory fitters
– Testers who work on other people’s vehicles on roads
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