What is motor trade insurance?
If you're planning on starting a business involving vehicles, you'll need motor trade insurance. But what is it?
Thinking of starting a business involving vehicles? Then you’ll need to get the necessary insurance policies in place.
Motor trade insurance is the umbrella term that covers the range of insurance policies that you’ll need to take out. In fact, if you’re planning on operating a business within the motor trade industry, you are obligated by law to take out a motor trade insurance policy.
Motor trade insurance covers you and your employees to drive both customer vehicles and company owned vehicles. It also covers any risks associated with your area of business, such as accidental damages or problems that are a result of faulty work carried out.
You’ll need to take out a motor trade insurance policy if you are starting up any of the following businesses:
- Car trader
- Vehicle recovery
- Tyre fitting
- MOT centre
- Mobile mechanics
- Body shop
What does a motor trade policy cover?
We cover the different policies, and anything else you’ll need to consider, in the section below.
Road risk only insurance
Road risk insurance covers you and your employees on public roads and properties when driving a vehicle for business purposes. You don’t need to own the vehicle, but it does need to be registered on the Motor Insurance Database (MID).
The law requires you to take out at least road risk third party cover, but there are three options to choose from:
If you’re worried about motor trade insurance costs, third party cover is the cheapest and most basic option. It covers injury, death, and damage caused by any vehicle connected to your business.
Third party theft and fire
An upgrade on the previous policy, this option covers any damage caused by your company to a third party vehicle, and covers your vehicle in the event of fire or theft.
Comprehensive (full cover)
The recommended option – fully comprehensive road risk insurance is designed to protect your business from all scenarios, including damage to the vehicle, fire, and theft. You can also use it to make a personal injury claim in the event of an accident.
Liability motor trade insurance
If you have employees and customers on premise, and either repair, supply, or service cars, then you’ll need to take out liability motor trade insurance. There are separate policies covering employee, public, product, and sales and services liability.
Employers’ liability insurance – protects your business against any claims made by your employees.
Public liability insurance – covers both you and your employees against claims made by customers and members of the public.
Product liability insurance – protects your business in the event of fitting a vehicle with a faulty product.
Sales and services indemnity insurance – covers you if you unintentionally sell a faulty vehicle, or if the work you or your employees carry out on a vehicle happens to cause problems
Combined motor trade insurance
Instead of taking out several insurance policies, you can take out one that covers you on a range of areas, including road risk, liability, and contents. This option is often cheaper than taking out seperate policies.
Just make sure that it covers all the things you need it to, and remember to take out any policies that your combined motor trade insurance doesn’t cover.
You may also need to consider that the policy covers…
Combined premises cover – Necessary if you run your motor business from a premises that isn’t your home.
Vehicle value payouts – Important if you happen to write off a vehicle while it’s registered under your business’ ownership.
Additional occupations – If you only work in the motor trade business part time, you may want to see if your policy covers you to use your vehicles for your other work, too.
Additional drivers – Make sure your insurance policy covers all of your staff. The cheapest option is to name individual drivers on the policy, but you can choose to insure all of your employees if you wish.
Cheap motor trade insurance – how to lower the costs
Getting the cheapest motor trade insurance for your business is all about shopping around and paying close attention to detail. When speaking to an insurance broker, consider and keep an eye on the following:
- Make sure there are no unnecessary add-ons – examples include Carriage Insurance (unnecessary if you don’t transport vehicles on the back of a truck or lorry) and Demonstration Insurance (pointless if you’re not a buyer and seller of cars)
- Keep the number of vehicles you’ll have registered on the MID to a minimum – the lower the number of vehicles you have registered, the lower your risk
- The better your storage and security, the cheaper the premium – if your vehicles are stored off the road or in a garage, you’ll be considered a lower risk
- Don’t deal with classic, HGV, high-performance, or modified vehicles – these are generally higher value, more expensive to fix, or more likely to break down, making them more expensive to cover
- A higher excess – the more you’re prepared to pay upfront in the event of an incident, the cheaper your cover
- Pay your premium in one lump sum – as standard across the majority of insurance policies
- Build up your no claims bonus – you receive a no claims bonus for each consecutive year you don’t claim. The more years no claims you have, the lower your risk
- Only employ drivers with no convictions – having a conviction automatically says to the insurance company that you’re a higher risk, making you more expensive to insure
Examples of motor trade insurance in action
How does motor trade insurance apply to your business?
Buying and selling cars for profit
Road risk insurance allows you to have more than one vehicle registered on the MID. This means you’ll be able to drive and sell more than one vehicle at a time.
You’ll need to make sure your policy covers you for demonstrations and stock protection, and you may even want to think about whether it covers you in the case of theft or damage while your vehicles are in transit.
Check out our guide to starting a motor trade business for more information on buying and selling cars for profit.
MOT and servicing
Make sure your motor trade policy insures you to drive customer vehicles. This means you’ll be able to test them, and drive them to and from your customers’ location.
It may be a good idea to cover your expensive tools and equipment, and include sales and service liability just to cover you in case any modifications you make or parts you install become faulty.
If you own a valeting business, or you’re looking to start one, make sure you take out a motor trade insurance policy that includes road risk cover and tools and equipment cover. This means you’ll be insured to drive customer vehicles, and all of your expensive valeting equipment will be covered, too.
If you’re operating your business from a business premises, make sure your policy includes public liability – and if you employ staff, you’ll need employer’s liability cover, too.
Choosing the right motor trade insurance
As you’ve probably gathered, getting the right motor trade insurance for your business can be a minefield. The best way to ensure you’re completely covered is to get in touch with a broker. They’ll ask you in depth questions about your business, then recommend the right policy for you, without trying to sell you unnecessary add-ons.
Whether you think getting motor trade insurance is worth it or not, remember that it is a legal requirement. Without it, you could face fines, court costs, and even a prison sentence.
Motor trade insurance FAQs
Do I need motor trade insurance?
Yes! If you operate a business within the motor trade industry and you don’t have motor trade insurance, you’re breaking the law. If found out, you could face fines, court fees, and even a prison sentence.
Can anyone get motor trade insurance?
To be eligible for motor trade insurance, you must operate a business within the motor trade industry. This could be buying and selling cars, MOT and servicing, valeting, tyre fitting, and so on. You’re also eligible for motor trade insurance if you work in the motor trade industry part time.
How should I apply for motor trade insurance?
Make sure you apply for motor trade insurance through a broker. They’ll be able to offer you the best deal for the cover you need.