Around 940,000 company cars are currently in operation on UK roads, making car fleets the most common type of commercial fleet by volume. Yet fleet car insurance remains poorly understood by many of the businesses that buy it, particularly the critical distinctions between company car policies, pool car arrangements, and business use extensions on personal policies — each of which carries different legal obligations, tax implications, and insurance structures. Getting this wrong does not just mean overpaying. It means driving uninsured.

Fleet car insurance covers two or more cars under a single commercial policy, replacing the need for individual policies per vehicle and consolidating renewals, claims, and administration under one contract. It suits businesses of every size — a sales director and a field engineer sharing two company cars qualifies just as readily as a national sales team running fifty vehicles. The policy structure, cover level, and premium will differ significantly between those two examples, but the underlying product is the same. Understanding how insurers assess and price car fleets, and what the policy must include to keep your business legally compliant and operationally protected, is what this guide covers.

Car fleets sit in a distinct underwriting category from van or HGV fleets. Private cars used for business carry different risk profiles — typically higher annual mileage, more varied journey types, and a broader range of drivers — and insurers price them accordingly. The interaction between fleet insurance, Benefit in Kind tax on company cars, and HMRC’s pool car rules adds a layer of complexity not found in commercial vehicle cover. Our guide on how fleet insurance works covers the general framework; if your fleet includes or is exclusively vans, our van fleet insurance guide covers the specific differences in detail. This guide focuses specifically on car fleets and the issues unique to them.

What fleet car insurance covers, and what it does not

Fleet car insurance provides motor cover for two or more cars under a single commercial policy. The fundamental cover types mirror personal motor insurance — third party only, third party fire and theft, and comprehensive — but the policy structure, excess arrangements, driver permissions, and claims handling are all calibrated for commercial operation rather than private use.

Comprehensive fleet car cover is standard for the vast majority of UK car fleets and includes damage to your own vehicles in at-fault incidents, third-party liability for damage and injury caused to others, fire and theft, and usually windscreen repair. A comprehensive fleet car insurance policy typically costs between £600 and £1,200 per car per year for a clean fleet of standard executive saloons, though this varies considerably based on driver profile, business type, and claims history.

Classes of use are one of the most important and most frequently misunderstood aspects of fleet car insurance. There are three primary categories:

Most fleet car policies default to Class 2 or Class 3 business use. Confirm the class in writing at inception, as a Class 1 policy that covers a salesperson visiting clients all day provides no valid cover for that activity.

What fleet car insurance does not automatically cover is equally important to understand. Personal effects left in the car are rarely covered beyond token limits (typically £100 to £250). Specialist modifications, glass roofs, and aftermarket technology added to company cars may need to be declared separately. Business equipment and samples carried in the boot require goods in transit or commercial contents cover, not motor insurance. And while the policy covers drivers authorised by the business, it does not cover an employee’s spouse or partner unless the policy specifically extends to personal use and named additional drivers.

Company cars, pool cars, and personal cars for business: the legal and insurance difference

One of the most consequential decisions a fleet manager makes is how to categorise each vehicle in the fleet for both insurance and HMRC purposes. The categories carry different tax treatment under Benefit in Kind rules and require different insurance arrangements.

Company cars are vehicles owned or leased by the business and made available to a specific employee for both business and personal use. The employee pays Benefit in Kind (BiK) tax calculated on the car’s P11D value (list price including VAT and options, excluding first registration fee and VED) multiplied by a CO2-based percentage band. For 2025/26, a petrol car emitting 75–79g/km carries a 21% BiK band; a fully electric car carries just 3%. The company insures the vehicle under its fleet policy and typically also pays the road fund licence and servicing costs. The driver does not need their own insurance.

Pool cars are company vehicles available to multiple employees and not ordinarily used by any single employee. HMRC’s pool car rules (HMRC 480, Chapter 15) mean pool cars carry no BiK tax liability, but the conditions are strict. The vehicle must be used by more than one employee, must not ordinarily be kept at or near an employee’s home overnight, and any private use must be genuinely incidental to a business journey. Insurers typically require any driver cover on pool cars with an age minimum (usually 21 or 25). The administrative discipline required to evidence pool car status is significant; a vehicle that fails HMRC’s test becomes a taxable benefit retrospectively for all employees who used it.

Personally-owned cars used for business (grey fleet) are vehicles the employee owns privately and uses for work journeys in exchange for a mileage allowance, typically at HMRC’s approved rate of 45p per mile for the first 10,000 miles. The employer does not insure these vehicles — the employee must hold their own insurance with business use class added. In practice, this arrangement is far riskier than most employers realise.

How fleet car insurance is priced: what underwriters actually assess

Fleet car premiums are calculated on the fleet as a whole rather than vehicle by vehicle, but the components that feed into that assessment are more granular than many fleet managers appreciate. Understanding what underwriters look at gives you the ability to present your fleet in the most favourable light and address the areas most likely to attract a premium loading.

Vehicle profile. Make, model, age, and value of each car are assessed against insurance risk ratings set by Thatcham Research. Since September 2024, Thatcham has been transitioning from the long-standing 1–50 Group Rating system to a new Vehicle Risk Rating (VRR) model scoring vehicles from 1 (low risk) to 99 (high risk) across five pillars: Performance, Damageability, Repairability, Safety, and Security. An 18-month dual-rating period runs until early 2026. In practice, a fleet of Ford Focus Estates (lower VRR scores) will attract very different underwriting to a fleet of BMW 5 Series saloons (higher VRR scores), even if driver headcount is identical. High-value cars also carry larger total insured values — a fleet of ten vehicles at £45,000 each carries a significantly higher comprehensive exposure than one at £22,000 each.

Driver profile. Even on any driver policies, underwriters want to know the youngest driver’s age, the minimum licence holding period, and any conviction or claims history in the driver pool. A fleet where the youngest driver is 24 with six months’ licence holding will pay materially more than one where all drivers are over 30 with at least three years’ experience. For named driver fleets, each individual is assessed, and a single high-risk driver can inflate the entire fleet premium. See our guide on any driver fleet insurance for a full breakdown of how driver policy structure affects cost.

Annual mileage. Total fleet mileage, and the split between motorway, A-road, and urban driving, feeds directly into frequency risk. A sales fleet covering 25,000 miles per car per year carries roughly twice the exposure of a management car fleet covering 12,000 miles. Be accurate with mileage declarations — underestimating can give an insurer grounds to reduce a settlement if the discrepancy is material.

Claims history. Five years of claims experience is the most influential single factor in fleet car pricing. A fleet with a loss ratio (claims paid as a percentage of premiums paid) below 40% over five years is well-positioned in the market. A ratio above 70%, or a pattern of frequent small claims suggesting poor risk management, will attract significant loadings or restrict the number of insurers willing to quote. See our full guide on how to reduce fleet insurance premiums for specific strategies to improve your loss ratio before renewal. For wider fleet cost benchmarks, see our guide on how much fleet insurance costs in the UK.

Named driver versus any driver: the decision that matters most for car fleets

The choice between a named driver and any driver policy structure is the single most consequential underwriting decision for a fleet car manager. It affects premium significantly, changes operational flexibility, and determines how you manage driver additions and departures throughout the year.

Named driver policies list specific authorised drivers against specific vehicles or across the fleet. Every driver is individually underwritten — their licence history, conviction record, and claims history are assessed separately. This produces lower premiums if your driver pool is clean and experienced, because the insurer can see exactly who is behind the wheel. The operational downside is administrative: every new driver must be added mid-term (usually triggering a policy amendment fee of £25 to £50), and any unlisted driver involved in an incident may find their claim declined.

Any driver policies permit any driver who meets the policy criteria — typically age minimum (21 or 25), full UK licence for a defined period, and no more than a specified number of penalty points — to drive any fleet vehicle without prior notification to the insurer. This suits fleets with variable staffing, temporary workers, or vehicles shared between multiple employees. Premium is typically 10 to 25% higher than a named driver equivalent, reflecting the insurer’s inability to price individual driver risk. For pool cars in particular, any driver cover is almost always the only practical option.

What a fleet car policy should include as standard, and what costs extra

Not all fleet car insurance policies are equal. The headline premium comparison between two quotes can conceal material differences in what is actually covered, what the excess is per claim, and which extensions require additional premium. A thorough policy comparison covers at least seven dimensions beyond the annual cost.

Windscreen cover is a standard inclusion on comprehensive fleet car policies and typically carries a separate lower excess (£75 to £125 for repair, £150 to £250 for replacement) than the main policy excess. For car fleets covering high annual mileage on motorways, windscreen claims are frequent enough that the excess terms matter practically.

Courtesy car provision is standard on most comprehensive fleet policies but the specification varies significantly. Some policies provide like-for-like replacement; others provide a standard small hatchback regardless of what vehicle was damaged. For a fleet manager running £40,000 executive saloons for client-facing directors, a small hatchback courtesy car creates a genuine problem. Read our complete fleet management guide for best practices on courtesy car policies. Confirm the specification in writing, particularly for high-value vehicles.

European cover is included on most fleet car policies as standard but may be limited to 30 or 90 days and may not extend to all EU countries or territories. For sales fleets or management teams that travel internationally, confirm the territorial limits and whether cover is at the same level as the UK policy or reverts to third party only abroad — a common restriction.

Breakdown cover is rarely included as standard on fleet car policies and almost always costs extra. For a car fleet where vehicle downtime directly affects sales visits or client meetings, fleet breakdown cover is a practical necessity. Our guide on fleet management covers the operational case for breakdown cover in detail.

Legal expenses cover typically costs £15 to £35 per vehicle per year added to a fleet policy and covers the legal costs of pursuing uninsured losses following a non-fault claim, excess recovery, loss of earnings, and injury claims where liability is disputed. For car fleets with regular city driving, where minor parking and junction incidents are frequent, uninsured loss recovery cover pays for itself many times over.

Fleet car insurance costs: what to budget by fleet type

Premium ranges for fleet car insurance vary widely depending on vehicle profile, driver ages, annual mileage, claims history, and business type. The figures below represent indicative annual premiums for typical fleet scenarios with clean five-year claims records. Fleets with recent at-fault claims, high-mileage Class 3 use, or young driver exposure should expect significant upward adjustment on these ranges.

All figures are indicative only based on 2024–2025 market data and assume a clean or near-clean five-year loss ratio. Individual fleet premiums will vary. The best way to establish your actual market rate is to go to a specialist broker six to eight weeks before renewal — see our guide on how to switch fleet insurance for the full process.

EV fleet insurance: what changes when your company cars go electric

Car fleets are electrifying faster than any other vehicle category in the UK — and the primary driver is tax, not environment. With Benefit in Kind on fully electric company cars set at just 3% for 2025/26 (rising gradually to 9% by 2029/30 but still far below petrol and diesel rates), the financial case for salary sacrifice EV schemes has become compelling for employers and employees alike. HMRC data shows that EVs now account for over 20% of company car registrations, up from under 5% in 2021. If your fleet isn’t already transitioning, it almost certainly will be within the next policy cycle.

The insurance implications of running electric company cars are material and often misunderstood. A standard fleet car policy written for petrol or diesel vehicles does not automatically provide adequate cover for an EV fleet — and the coverage gaps can be expensive. Before adding EVs to an existing fleet policy, confirm each of the following with your broker.

Frequently asked questions