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Motor Trade Insurance Guide
Are you in a motor trade? Are you thinking about becoming involved in a motor trade? Are you new to the motor trade business? If you’ve answered yes to these questions, then you’ve come to the right place.
Anyone involved in the motor trades needs to have the right type of insurance to operate their business. Motor trade insurance allows you to work with motor vehicles. This insurance protects you against many types of issues. If you don’t have the right type of coverage, it could put your business out of operation, and you could even lose your home and more.
While somewhat similar to the regular car insurance that protects your personal vehicle, motor trades insurance protects your business. You’ll find there are several types of coverage available.
In this guide, we’ll go over everything you need to know about motor trade insurance—from what it covers to how to keep your premiums low.
In the next section, we’ll take a look at what motor trade insurance is and why you need it.
2). What is Motor Trade Insurance?
Motor trade insurance is coverage for anyone who works with motor vehicles, but mostly with cars, vans, and motorbikes. It’s made to cover businesses of all sizes—from small to large businesses and protects even those who are part-time motor traders.
Motor trade insurance is a legal requirement under the Road Traffic Act of 1988. Driving without insurance is against the law. If you’re caught driving without the proper insurance coverage, you could face a fine of £300 and you’ll have 6 penalty points on your driving record. It’s also possible to receive much larger fines and even lose your driving license.
3). Businesses that Need Motor Trade Insurance
To put it simply, anyone who works with cars needs this type of insurance protection. Specifically, this insurance covers the following professions:
- Motor traders (car dealerships, salesmen who work part-time or full-time): these are the people who buy and sell new and used cars. They also allow individuals looking to buy a car take it for a test drive.
- Vehicle recovery agents: those who work to recover cars that have broken down on the side of the road, though they could also be related to collection agencies.
- Vehicle restoration: these are businesses that work to restore cars; both part- and full-time restorers will need to have motor trade insurance.
- Valets and valet services: valets work for a valet service; the work involves parking cars for patrons.
- Tire fitters: people who specialize in repairing, maintenance and replacement of vehicle tires.
- Mobile mechanics: those who provide a mobile mechanic service.
- Body shops/repair garages: these are businesses that fix your vehicle when it breaks down. If you’re a business owner, you’ll have tools, employees, etc.
These are the basic categories of those who fall under the motor trade label. Each of these businesses have different risk factors, so you’ll need to find an insurance policy that is tailored to meet the specific needs of your business.
4). Types of Motor Trade Insurance
While motor trade insurance (also called Road Risk Insurance) is legally required, you’re only obligated to have the minimum amount of protection, which is third party coverage. In other words, this is the most basic amount of insurance you can buy and offers only minimal protection.
Let’s review the types of motor trade insurance coverage available:
Third Party Only: as noted above, this is the minimum amount of coverage required under the law. This type of motor trade insurance is required for motor traders that:
- Drives his own or customers’ vehicles on public roads
- Provides general repair services for customer vehicles
- Buys and sells cars for profit
- Operates as a valet, vehicle fitter or mobile tuner
- Operates a MOT (Ministry of Transport) station or garage
- Restores & repairs cars
Third Party Only motor trade insurance protects the trader from legal issues that arise from injury, death or damage caused by any vehicle that’s connected with their business. Any driver listed on the policy is permitted to drive any vehicle in relation to the business. Damage to others’ vehicles is covered; however, damage to your own vehicle and any injuries you suffer are not covered. Repairs and medical expenses will have to be paid out of pocket. These are not covered under Third Party Only policies.
- Third Party Fire & Theft: this type of coverage includes everything above, and includes coverage for fire, theft, loss and damage to vehicles in the company’s care. Third party injuries, damage and claims are covered under this policy.
- Comprehensive: this type of coverage includes everything in under Third Party Only and Third-Party Fire & Theft. In addition, it covers accidental damage to any vehicles you have under your control, custody or that you own, even if you’re found at fault.
- Combined Motor Trade Insurance: under this type of policy, all of the above is covered. Plus, it protects your business premises, money, tools, vehicles, liabilities and contents. This protects the motor trader’s entire business, and while also protecting traders who operate from home.
- Motor Trade Liability Insurance: this type of protection includes public liability, employer’s liability, sales and service indemnity. For instance, if an employee is hurt on the job, is indemnified due to an injury caused to the public plus loss or damage of property. The business is also protected against accidental damage to any property due to the buying and selling of new or used vehicles, the sale or supply of products connected with the motor trade, and the alteration, maintenance, inspection, testing, servicing, cleaning and repair of motor vehicles.
As you can see, there are various types of motor trade insurance, so it pays to do your research in order to purchase the best policy and the most coverage for your business.
5). Do I Need Motor Trade Insurance?
Yes, you need to have this type of insurance coverage. No matter what type of business you run as a motor trader, you’re legally required to have this type of insurance under the Road Traffic Act 1988. This is the main reason you need this protection.
Some people ask why their personal car insurance can’t cover their motor trade business. That’s a good question and here’s the answer. Private car insurance policies usually include some statement that says the policy will not cover you for activities such as:
- Rally driving
- Track days
- Operating as a motor trader
So, if you drive a customer’s car and don’t have motor trade insurance, you’ll be driving without any type of insurance coverage. This is against the law, as noted above. If you’re caught or cause an accident in a car that belongs to a customer, you also run the risk of your insurance company inactivating your personal car insurance policy.
And for those who are wondering if they need motor trade insurance for their part-time business, the answer is also yes. If you don’t need the regular type of motor trade insurance, then you might find an insurance agency that has a type of insurance called Part-Time Motor Trade Insurance.
Along with possible fines and loss of your personal motor insurance coverage, you also could face losing your driver’s license, which means you would not longer be eligible to drive on public roads. This could close your business and make it highly probable that you’d have to pay extremely high premiums on any type of car insurance in the future.
We’ve covered some pretty stark scenarios thus far, yet we still have more reasons why you need motor trade insurance.
Now that you know you must have motor trade insurance; you’ll need to make sure to buy the right type of this coverage for your business.
If you have a large business with a large number of vehicles and have employees, you may find that Third Party Only, or even Comprehensive may not be the right policies for you.
If you have just one employee, you’ll be required to also buy Employer’s Liability, which is legally required under the Employers’ Liability (Compulsory Insurance) Act 1969. It’s illegal to run a business and not have this insurance coverage.
According to this law, you are required to have at least £5 million of coverage from an authorized insurance provider. There’s a penalty of £2,500 for each day that you’re not properly covered. That’s a pretty stiff fine. Most businesses would find it very difficult paying this amount of money for each day they’re without employee liability coverage.
Think of the many types of serious issues that can develop at a motor trade business of any type. These are often hazardous places for employees, even if they’re only selling cars. Some of the most common dangers include:
- Heavy machinery
- Toxic fumes and chemicals
- Injuries of various types, including damage to a limb or extremity
- Service pits, ramps and hoists
Each of these areas carries various types of injuries, but it’s also possible for employees to accidentally cause damage to a car. For instance, if a tool falls and nicks the car’s paint job, repairs could easily cost several hundred pounds, depending on vehicle’s make and model. This is just one example, but there are hundreds of things that an employee could do to a car.
These are the many reasons you must have motor trade insurance. It protects your business, your customers’ vehicles, third party property and wellbeing, and more. Without this insurance, your company could face a huge liability, penalties, legal costs and more. You could lose your entire business due to not having the legally required insurance coverage.
6). Motor Trade Road Risks vs Combined
We’ve covered the fact that you’re legally required to have some type of motor trade insurance if you’re in the motor trade industry. When you’re ready to buy motor trade insurance, you may be asked whether or not you need Road Risk Only or a Combined policy. What’s the difference between these policies and how do you know which one to choose?
Road Risk Insurance
Most insurance providers design their Road Risk policies for smaller traders. These motor traders are usually just starting out and may be working from home or running a small business premises that don’t need to be insured (for example, if you’re renting, and the property is protected by the landlord’s insurance). This type of policy is usually cheaper than a Combined policy.
Road Risk policies are better for motor traders who run their business from home, or those who rent a business premises that’s protected by the landlord’s insurance. As we saw earlier, that are three types of Road Risk insurance to choose from.
For those who are just starting out, then the Third Party Only policy may be your best option. This meets the minimum required by law and is usually the least expensive option. This may also be the best option for those who are running a part-time business. Also, if you’re doing a lot of driving, but don’t require protection of premises for your business, then a Road Risk policy may be your best option.
One important note—as your business grows from part-time to full-time, it’s important to let your insurance provider know, as this information must be noted in your insurance policy. If you don’t, the insurance could cancel your policy, and then your business will be uninsured. As a result, the operation of the business would become illegal and you’d have to close.
Combined Motor Trade Insurance
This type of motor trade insurance policy is more complex and is usually designed for larger businesses A combined motor policy will be the best option if you have a large motor trade business and you operate from a business premises that’s not rented (or covered by the landlord’s insurance). Under this type of policy, your entire business will be protected—it will cover everything that basic motor trade policies cover, plus your buildings, equipment, money kept on site, etc. And with a comprehensive policy, you can also add on liability insurance.
Which insurance is best for you? If you’re running a small motor trades business from your home, then a road risk policy may be the best option. However, if you’re running a large motor trade business, selling cars, or running a repair center, then a combined policy may be the best option for you.
7). What Insurance Add-Ons are Available for Motor Trade Policies?
In addition to your regular motor trade insurance policy, there are add-ons that can further tailor your insurance coverage and protection. The type of add-ons you require will depend on the type of motor trade business you run and how the business is set up.
Vehicle Recovery: this type of policy is especially designed for breakdown & recovery service providers, who work part-time of full-time. It covers the company’s vehicles, along with third party vehicles that are being towed, transported or worked on.
You’ll find there are three levels of this type of insurance:
- Third Party Only
- Third Party Fire & Theft
If you have one or more employees, you’ll also need Employer’s liability insurance. Another recommended extra is Public Liability insurance, which protects the public in case of accident, injury or death. It also covers damage to their property that is caused from running your business.
Collection and Delivery Agents: this policy is designed for motor trader that run a business that delivers or collects vehicles. It also covers those who transfer cars from auction houses and garages who use a recovery vehicle or trade plates. This insurance may also include carriage of vehicle protection.
Car Jockey: car jockeys tend to drive others’ vehicles for a short distance, such as to and from car parks and storage sites, and they often work on contract for facilities such as hotels, nightclubs, ferry port, restaurants, casinos, airports, etc. The type of vehicles driven vary from high-end luxury to hatchbacks.
This type of policy will vary as to what’s covered based on the details of your specific business. For instance, if you store vehicles in your own compound, then you may also need to have what’s called Compound coverage. And if you own more than one compound, you’ll want to purchase a policy that covers multiple premises. This type of insurance protection is flexible and can protect everything from luxury models to those that are less expensive.
Mechanics, tire fitters, valeters and body shop: this type of insurance coverage is made especially for these types of motor trades and where they run their businesses. Policies may include protection that allows for the transportation of vehicles and may also include coverage for their tools and other equipment.
Mobile mechanics insurance & mobile tire fitters: is a specific type of coverage for these motor trades. For instance, due to the mobile nature of the work. For instance, they may need special coverage to cover their tools. Tools are carried in their vehicle during working hours, so it will be necessary to have Tools & Transit insurance to protect the tools from theft, etc.
Another thing to keep in mind is that due to being on the road and driving more, your Motor Trade insurance premiums will tend to be higher.
Another consideration—if you’re a mobile mechanic or tire fitter with a business premises (not covered by a landlord’s insurance), it will be necessary to have an insurance policy that covers buildings and contents, too. This will protect you in the even of problems such as fires, theft or damage.
Employer’s liability: you are legally required to Employer’s Liability insurance, even if you only have one employee. This is a requirement under the Employer’s Liability (Compulsory Insurance) Act 1969. In addition, the law requires you to post the details of this insurance for employees to view.
This type of coverage protects you in the event an employee becomes injured or ill during the course of working for you. They may be on your business premises or may be somewhere else completing work for the company. In the event they press a claim, the insurance will protect you. The insurance will cover any claim, along with the legal costs. Without this insurance, your business could well close if it wasn’t able to cover the claim and legal costs.
The law requires that you have at least £5 million; however, most policies will cover you up to £10 million. And here’s another important point: for each day you don’t carry enough Employer’s Liability insurance, you can be fined up to £2,500. You can also be charged for not providing the certificate to Health & Safety Executives and for not having this displayed for employees. As you can see, you want to make sure you have this coverage, even if you only have one employee. Not following the law could well close your business for good.
Product liability: is not a legal requirement, but it is important to consider this type of protection. This is used by companies that supply products to customers. For those in the motor trades, products can include vehicle brakes, spark plugs, tires and more. The insurance steps in if the product happens to fail.
For example, with the example of vehicle brakes, think of what could happen if those fail and cause an accident. Having Product Liability insurance will protect you and your business from such an accident and the resulting costs.
Public liability: this type of coverage is not required by the law; however, it is a valuable addition to the protection of you and your business. Public liability insurance covers situations such if a customer is injured or suffers property damaged while they’re at your business premises.
Again, this is not required by law, but could protect you and your business from claims and legal costs associated with such situations.
8). Things to Avoid When Purchasing Motor Trade Insurance
When it comes to buying Motor Trade insurance, there are a few things to keep in mind. The first and foremost point we’d like to stress is that you should always be completely honest with your insurance provider.
Most people want to get the cheapest insurance rates possible. That’s understandable; however, in order to get those cheaper rates, some people provide misinformation to the insurance agent. This is not only against the law, but it’s a sure way to have your motor trade insurance invalidated. Not only that, but it can be extremely difficult to find insurance with another provider.
If you do find an insurance agency willing to sell you a policy, their premiums will be much higher due to you having lied on previous insurance applications. With no insurance, you won’t be able to run your business.
So, always be honest with the insurance agency. It’s not worth the effort to lie on your application.
Now, let’s take a look at other methods people use to find a cheaper insurance rate:
- Undisclosed claims: not disclosing past claims on any type of insurance you have including home insurance, private car coverage, etc. If you don’t inform the insurance provider about past claims, and they find out later you lied, your motor trade policy may be cancelled.
To avoid this problem, make sure to let the provider know about all past claims. They may be able to help reduce the cost of policy premiums through a type of specialist insurance called Convicted Driver Motor Trade insurance.
- Including family members’ vehicles: this is another method some try to obtain lower insurance premiums. For instance, a business owner needs Motor Trade insurance and chooses to include his family’s vehicles in the policy. The problem arises when these vehicles are not used for business.
There is one exception—it is possible to cover a spouse’s vehicle under this type of insurance, even if they use the vehicle only for personal purposes.
- Owner claims to be employee: this is another method people have tried to get lower insurance premiums. By using this method, you end up losing out on some important coverage. For instance, you’ll lose the ability to use cars for social purposes, your personal vehicle won’t be covered under the policy. In addition, you won’t be able to use the no claims bonus.
There’s also the risk of having your policy cancelled if the insurance company finds you’ve falsified information on your application.
- Part-time claiming full-time: questions on the insurance application will ask if you’re running a part-time motor trade business or one that’s full-time. In an effort to obtain a cheaper premium, some people who are part-timers claim they’re running a full-time business.
Once the insurance provider finds you’ve lied on the application, the insurance policy will be cancelled. It will also be more difficult to find another insurer to cover your business, and premiums will be much higher as a result.
- Undisclosed convictions: by not disclosing past convictions, you run the risk of having your motor trade policy cancelled or voided. If you have past convictions, be sure to let the insurer know this. They may have a special policy called Convicted Driver Motor Trade insurance. This will help you get a lower rate on your premium.
- Falsifying address: this is a very common problem when it comes to insurance fraud. This is another method to find cheaper insurance premiums. If you falsify your address, it’s possible to get a cheaper insurance rate. The reason is that certain locations have lower rates because they have fewer claims, lower crime rates, a lower number of accidents, etc.
Again, the if the insurance provider finds you’ve falsified the address, you risk having your policy cancelled. You’ll also find it extremely difficult to find another insurance company that will cover you and your rates will be even higher.
- Undervaluing stock, not declaring modifications and not declaring other categories of stock: this will cause a huge problem. You must be completely honest about the stock you carry, modifications to vehicles in your possession, etc. Not being honest will likely result in a cancelled motor trade policy, etc.
- Claim you have a parking area, but don’t actually have one: this is another way to obtain cheaper insurance rates; however, it can result in cancelled insurance, etc. Some people have a business and then claim to have a place to park cars they’re working on in a safe place. However, in reality, they may be parking the cars on a busy street or in some other unsafe area. Again, if the insurance company realizes you’ve falsified information, your policy will be cancelled, etc.
Just to sum it all up, if you falsify any information on your Motor Trade insurance application, and the insurance company finds out (which they usually do), you face having your policy cancelled. As a result, your business will not have the legally required coverage and will have to close.
Worse yet, if you have made a claim, it will not covered if your insurance policy is cancelled. In addition, obtaining a Motor Trade policy in the future will be more difficult and you’ll face even higher premiums. This is because you pose a higher risk to an insurer who chooses to sell you a Motor Trade policy.
9). Legal Methods to Find a Lower Motor Trade Insurance Premium
In the last section, we reviewed the methods not to use to obtain a cheaper premium. In this section, we’ll review legal methods to help you find the best Motor Trade insurance premium.
- Proof of trading: this is the best way to find a cheaper premium. Proof of trading proves to the insurer that you’re actually in business as a motor trader. Keep in mind if you don’t follow through with the proper paperwork, then the insurer will cancel your policy. Without the Motor Trade insurance coverage, your business will not be able to legally operate.
- Location: when searching for coverage, check to see if you might get a better premium in another location. This will, of course, involve moving your entire business premises. This may or may not be an option for your company. In most cases, this isn’t an option. However, if your business is located in an area with high crime rates, you may be able to lower your premium by adding increasing the security methods the business uses. If the premises are more secure, this could help to lower the cost of your premium.
- Increase your excess: this is another helpful method to lower your insurance premium. Another way to lower your rates may be to restrict what can be claimed under your policy.
- Age of drivers: if you have drivers on the policy who are under 25, this will definitely increase your premium. If you avoid adding them to the policy, it could save money on your policy. You can also save money by not listing drivers who have past convictions.
- Low number of drivers: you can also save money by only listing a low number of drivers on the policy. With more drivers, there’s an increased risk of accidents and other issues.
- Build up no claims discount: this is another helpful method to save money on your premium. However, if you’re just getting started in the business, you won’t have a claims discount built up for this type of coverage.
- Ask your insurance agent if they accept your personal vehicle no claims history. If you have quite a bit built up, this could be a great way to lower your premium.
- Find a secure place to park vehicles: if you park vehicles in an unsecured area, this will definitely increase your Motor Trade insurance premium. So, make sure you’re not parking vehicles on the street and make the parking area more secure.
If you’re a mechanic, and store your tools in a vehicle overnight, this can also increase your premium. Make sure to park your vehicle in a more secure location and this will help to lower the cost of your Motor Trade insurance.
10). Use a Comparison Site to Research Policies & Obtain Quotes
Now you’re ready to do some research. It’s always a good idea to do your own research on the types of Motor Trade insurance available, what the policies cover, and get an idea of how much the coverage costs. One way to do some quick research is to use an insurance comparison site. First, make sure they offer Motor Trade insurance quotes, then choose the type of insurance you need.
It’s fast and easy—just fill out the form with all the correct information. Be sure to use correct information, otherwise the premium quotes will not be accurate. Once the form is all filled out, hit enter and wait for the quotes. Be sure to read through all the information for each insurer, as this is the only way you’ll gain the information you need.
The benefits of using a comparison site for research is that it offers a fast way to review a large number of insurance providers and quotes on their insurance premiums. This way, when you begin talking with an insurance provider, you’ll have an idea on how much the premiums should be, etc.
Think of the process of buying the right insurance as similar to buying a car. You need to know what’s included in the car’s base price (for example, does the price include air conditioning, etc.), what extras cost, and what they’ll charge for the vehicle you want. Buying insurance is a similar process. Doing the research in advance will help you have an idea on prices and more. You’ll be able to avoid an insurance provider that may not have your best interests at heart.
11). Where to Find Cheap Motor Trade Insurance
When it comes to finding the cheapest Motor Trade insurance, there are many insurance providers who will offer you what seems to be a great buy. However, keep in mind the cheapest policy may not be the best protection for your business. In fact, you may end up spending more money in the long-term if the coverage isn’t adequate or the right type for your business.
There’s also the fear of talking with an insurance provider, broker or agent who try to sell you every product under the sun. That can be a problem; however, most providers are genuinely interested in providing you with the right insurance for your business.
A professional Motor Trade insurance provider will be helpful with any questions you may have about their policy, what it covers, etc. Don’t hesitate to ask any questions you may have. The agent or broker is there to help you with their professional advice and guidance.
If you already have Motor Trade insurance coverage and it’s time to renew, now is a great to time review the policy. You may need to update the policy if anything has changed with your business, such as going from a part-time operation to full-time, etc. Some elements of your coverage may need to be updated to reflect these changes in the business.
When looking for a new policy, keep your business in mind. The type of Motor Trade coverage you need will be based on the type of business you’re running. If your business is large and/or complex, then expect that your insurance policy will reflect this with more complex coverage.
And always check to see if you need additional coverage for any aspect of your business. For instance, if you have employees, then you’re going to need Employer’s Liability. And if there are customers on your business premises, then you’ll probably also need Public Liability coverage.
You may find the best quotes and coverage by working with a specialist Motor Trade insurance broker. They’ll have the knowledge and experience needed to ensure you have the right type of policy and the right amount of coverage for your business needs.
Remember, just because you get a quote doesn’t mean you have to buy a policy from that insurance provider.
When you’re looking to buy or renew a Motor Trade insurance policy for your business, always provide the correct information to the insurance provider. If you knowingly falsify any information on the insurance application, you run a high risk of having your policy invalidated or cancelled. Then if you have filed a claim, it will be rejected with the insurance is cancelled, leaving you to pay everything out of pocket.
Falsifying information on your application can also lead to criminal proceedings and make it more difficult to find insurance in the future.
Be sure to review your business and the type of coverage you may need. Then do some quick research to see what policies and quotes are available from various insurance companies. With this information, you’ll be ready to talk with an agent or broker. Be sure to ask them any questions you may have in regard to the right type of Motor Trade insurance for your business.
Before signing any contract, read through all the terms and conditions. This way you’ll understand exactly what’s covered or not, and if you have questions, you can ask them rather than learning later. You’ll avoid hidden costs or terms and know everything about the policy before you buy.
When you receive quotes from insurance providers, remember just because you get a quote doesn’t mean you have to buy a policy from that insurance provider. If you’re not comfortable with the quote for any reason, and/or aren’t comfortable with the broker or insurance provider, then it’s OK to walk away from that particular deal. Keep searching until you find a quote that works for you, with an agency that feels comfortable.
This is the best method to find the right insurance policy, with an affordable premium, for your company.