What Is Motor Trade Insurance and What Is Covered?
Motor Trade Insurance Explained
Motor Trade insurance is the general name for the type of insurance policy offered to people working within the car industry. This includes buying and selling vehicles for profit (Traders), fixing vehicles (Mechanics & Mobile Mechanics), cleaning vehicles (Valeters), moving vehicles (Car Jockeys) or recovering them if they’ve broken down (Vehicle Recovery Agents).
What Levels Of Cover Are Available For Traders?
There are two types of Motor Trade insurance available: 1.) Road Risk Only, and 2.) Combined cover. A Road Risk policy is aimed at people who operate from home and small businesses with minimal assets. This can include mobile mechanics and car salesman who operate from their driveway or run a mobile business.
A Road Risk insurance policy can cover you to drive any vehicle in your possession (such as ones you own or in your stock), for either personal use or for motor trade purposes. You are also covered for vehicles belonging to your customers, where driving is required to carry out your work.
Motor Trade Combined
A Combined policy can also cover your buildings, contents, tools, equipment and money too. As with standard Car insurance, Trade policies come in three levels of cover – Third Party Only, Third Party, Fire & Theft, and Comprehensive cover. Each level of cover offers a different level of protection.
Additional Cover Available
There are also a number of additional Liability products available to Motor Traders – Public Liability, Employers’ Liability, and Product Liability (also known as Sales & Service Indemnity). Public Liability covers you against any claims made against you by members of the public for personal injury or damage to property, whilst Product Liability covers any work you carry out or parts that you fit, in case they are faulty. Employers’ Liability is a legal requirement for any business with employees, covering you in case of personal injury or illness caused as a result of the work they carry out.
Types of Cover
- Third Party Cover
- Third Party, Fire & Theft Cover
- Comprehensive Cover
- Employers’ Liability Cover
- Product Liability Cover
- Public Liability Cover
- Road Risk
- Combined Cover
Understanding Motor Trade Insurance
Understand what a Motor Trade insurance policy is and who needs one.
Whether it’s your first time getting cover or your 50th, properly understanding Motor Trade insurance can mean you get the best out of your policy.
What’s The Difference Between Motor Trade and Private Car Insurance?
A regular Car insurance policy would only cover you for driving your car, or someone else’s, for private or business use, depending upon the policy and level of cover. In contrast, a Trade policy is designed for those who work with or own multiple cars, including customer’s cars. Due to the high volume and frequency of vehicle changes in your possession, it would be a lot of hassle to update the insurer for each car being covered if they only had a private car policy!
What Levels Of Cover Are Available For Motor Trade Insurance?
There are two types of Motor Trade insurance available: Road Risk Only and Motor Trade Combined cover. A Road Risk policy is aimed at traders who operate from home and small traders with minimal assets. This can include traders such as mobile mechanics and car salesman who operate from their driveway or run a mobile business.
Three basic levels of cover are available:
Similar to the Private Car equivalent, this is the most basic level of cover, and only covers the third party if you are involved in a crash that is deemed to be your fault. A Road Risk Third Party Only policy would be the most basic (and the legal minimum) amount of cover available to motor traders.
This covers the same as TPO above, but also includes fire damage to/theft of your vehicle or a customer’s car – unless you have been involved in a crash that’s your fault.
This includes all of the benefits of a Third Party, Fire and Theft policy, but you will also be covered for any damage to your car whether it’s your fault or not. There are some businesses who may only need a Road Risk policy but want some additional cover in the form of Liability insurance, such as those who employ an extra person to help with their business, who will need Employers’ Liability cover. Mobile mechanics who operate from home may also find having Product Liability cover useful, to cover them in case any of the parts they fit are faulty and cause damage to a customer’s vehicle as a result.
For those who operate from a specific premises and have customers visiting their place of business, they may want Public Liability cover in addition to their main policy. Most motor traders that have a specific business premises will need to take out a Combined policy, as this will cover much more than a Road Risk Only policy, including tools & equipment, stock of vehicles, business interruption, the building itself and more.
To sum up, the more complex your business is, the more complex your Motor Trade insurance policy will need to be, so that you are properly insured for any scenario, whether that’s damage to a vehicle whilst on the road, or theft of machinery after a break in at your business premises.
If you work in the industry, whether you’re selling, buying, fixing, moving, cleaning or recovering vehicles, then you need Motor Trade insurance to protect you and your customers should anything happen. Whether you work from home or from premises, are full-time or part-time, if you work in any of the professions listed below then you need to consider getting cover in place.
Motor Trade insurance is strictly for those who operate a business, and not general members of the public looking for a cheaper way to get cover for a number of vehicles. If you are unclear on whether you are eligible for a Motor Trade policy, there is a large range of vehicle professions that may need a policy, whether it’s Road Risk cover you’re after, or a Motor Trade Combined policy. The list of trades can include:
The 'motor trade' is a broad term that can cover a number of professions and businesses – but anyone who works with vehicles as their business may need a policy, whether it’s a Road Risk policy or a Combined one. This can include:
Vehicle Sales insurance policies are aimed at those that buy and sell vehicles for profit. It doesn’t matter if this is your full-time job, or you do it on a part-time basis alongside another occupation. We can cover those working from home or from a specific business premises, and can tailor your policy to cover the things you need as part of your profession, such as demonstration cover, goods-in-transit or stock of vehicles. For larger businesses, we also offer cover for buildings, contents, tools and money.
As a mechanic, you’ll need a policy to cover you against a number of things specific to the work you carry out. You’ll need cover that allows you to drive customer’s vehicles for testing and diagnosis, and you’ll likely need protection for your tools and equipment such as lifting machinery and vehicle ramps. If you’re selling and fitting parts, then you may also want Sales & Service Liability just in case anything goes wrong with the work that you do or the parts that you fit.
A body shop often contains a range of specialist or, at the very least, expensive equipment that will need to be covered by the Tools & Equipment cover offered under a Body Shop insurance policy. This specialist equipment may be crucial to the operation of your business, and damage to that equipment could cause your Body Shop to suffer a loss of income, and therefore it would be necessary to make sure your policy includes Business Interruption cover.
Our Body Shop insurance policies can be tailored to suit your business, with cover for your machinery, all of your tools and specialist equipment (such as spraying booths), your premises and its contents as well. If you have vehicles or courtesy cars, these can be covered, and if your business has employees, we can cover them too with our Employers’ Liability. You can also add Public Liability or Sales & Service Indemnity, to make sure you’re covered if anything should happen to a member of the public, or as a result of the work you have carried out.</p
Whether your vehicle recovery operation is a part-time business where you use your home as your base, or it’s an established business with multiple drivers working from a designated premises, you will need to have a Motor Trade insurance policy that protects your own vehicles and those belonging to both the public and your customers.
Carriage of Vehicles cover will protect the vehicles you transport on the back of your flatbed truck, so that if any damage is caused by or during your transportation of the vehicle, you will be covered. If you choose not to include Carriage of Vehicles cover, you won’t be protected by the Comprehensive aspect of regular Motor Trade insurance policies, as this only applies to the vehicle you are driving.
As your work is usually carried out on public roads where members of the public may get injured or their property damaged, if something goes wrong, it’s important to be protected against that scenario. Making sure you have Public Liability cover will protect you against damage to third party property that’s caused by your business. This could be a client’s car rolling off the flatbed truck into the wall of someone’s garden, for example.
A Tyre Fitter’s policy fits into the same bracket as the likes of Mechanics insurance and Body Shop insurance, as it involves work being carried out on a customer’s car. Therefore, like a Mobile Mechanic or Car Garage policy, cover for the tools and equipment used is necessary, as well as protection for the business itself offered by Product Liability and Public Liability insurance.
In addition to the protection of the tools & equipment used by your tyre fitting business, you may also want to ensure that your policy provides cover for moving client vehicles – if your business requires it. Your garage may have vehicle ramps and lifting equipment that you’ll want to protect, and you may even have employees working for you that need covering too. All of these things can be protected under a Tyre Fitters insurance policy with Think, whether you’re a full-time or part-time trader.
A Valeters insurance policy can be relatively simple, depending on the size and scale of the business. If you are a valeter that has set up on an unused plot of land such as a former car park, you may only require a Road Risk insurance policy. If this describes your business then you may also want to include Public Liability cover too, so that if anything happens to any of the customers on your site you will be covered. You may also want to include Product Liability to protect your business from any claims in the unlikely event that a cleaning solution you used stains the upholstery of a client’s car, for example.
Our Valeters policies are created specifically to suit professional valeters and vehicle detailers, whether you work from a designated premise, work from home, or provide a mobile valeting service. We’ll provide you cover to move your customer’s vehicles, as well as protecting your tools, equipment, and stock against theft and damage. Working with chemicals and cleaning products means there is always the chance that an accident will occur, so we’ll cover you and your business, and protect your employees, your customers and their vehicles too.
Our policies for Car Jockeys provide cover for you to drive your customer’s vehicles to and from designated premises and storage sites. You may only be moving vehicles a short distance, but you still need to protect yourself and your customers. We can also cover your premises, buildings, contents and any equipment you may have, as well as offering Public and Employers’ Liability cover too.
Often a mobile mechanic is a one-man operation with the van doubling as the place of business, and if this is how you work, then you’re going to want to make sure your livelihood is covered. This includes having cover for any tools & machinery you use as part of the work you carry ut, in addition to Goods in Transit cover.
A Mobile Mechanics policy can cover you for testing and diagnosing the vehicles you’re called out to, as well as protecting your own vehicles, tools and equipment too. As a mobile mechanic, you will be working wherever the customer needs you, so having Public Liability cover will protect you against claims made against you for injury to a member of the public or damage to their property. We can also provide Sales and Service Indemnity to cover any work you do and parts you fit, just in case there’s anything wrong with them.
When arranging your Motor Trade insurance, there are a number of things you should consider: Never be tempted to lie about your circumstances – Your policy is based on the details you provide when getting your quote. Sometimes you may know that certain answers will cause your price to increase, and so be tempted to lie, or leave out certain details to reduce your premium. However, when we find out, your policy can be cancelled and made void, and any pending claims could be rejected. This could lead to further problems if you were required by law to have cover, and it will make getting cover in future very difficult.
Carefully consider who to add to your policy
The more drivers you add to your policy, whether they be employees, business partners or members of your family, the greater the risk you pose to the insurer as there is more chance of someone being involved in an accident. Therefore, to keep your premium down, always consider who you want to include on the policy as their circumstances can affect how much you pay. Drivers under the age of 25 will have a significant impact on the cost of your insurance as they are seen as a much higher risk. Similarly, drivers with driving convictions or criminal convictions can increase your premium, and in some cases, make it difficult to get cover at all.
Take a thorough look at your business – Insuring your business is a process not to be taken lightly, and should involve a thorough review of your business. This includes looking at how you operate now and how you plan to operate in the coming months. Take a look at all aspects of your business, including the premises you operate from, any tools & equipment you may use and the cars that come under your care.
Consider additional drivers carefully
When taking a look at your business you may recognise that you need to have additional drivers on your policy. However, to keep costs down and to make sure you don’t need to claim, carefully consider who is named as a driver on your Motor Trade insurance policy. If you can, try to avoid young drivers and anyone with a poor driving history such as multiple claims and/or convictions.
Know the law
You’ll be well aware that in order to drive on UK roads you must have, at the very least, Third Party cover. However, there may be additional covers you need to take out to satisfy the law, such as Employers’ Liability cover if you have any employees.
When taking out your policy it’s important to be 100% truthful. Omitting certain aspects of your claims history or not being honest about where vehicles are kept can and will end up with your policy being cancelled, leaving you with no cover and a black mark against you.
If you only need a Part Time policy, then get a part time policy! – If you only operate on a part time basis you must get a Part Time policy, as they are designed specifically for part time traders. If you get a regular Motor Trade insurance policy when you don’t qualify, you will most likely have your cover cancelled or any ongoing claims rejected.
Don’t snub additional products
When taking out cover you may be offered a wide range of additional products and think nothing of it when rejecting the chance to add them to your policy. However, this might not be the best route to take. For example, if you run a used vehicle sales business and don’t take out Stock of Vehicles cover, your cars won’t be covered at your business premises.
Consider Liability insurance
Working in this industry, you’ll most likely need three types of Liability cover; Employers’, Public and Product Liability. Whilst the former has been covered in ‘Know the law’, it’s important you research Public Liability and Product Liability as both could offer further protection for your business.
There are three main Liability insurance products that can be included when you take out a Motor Trade policy. Some traders may need certain Liability insurance products to satisfy a legal requirement, whereas other Liability products will simply provide better protection and peace of mind for your business.
Public Liability Insurance
If you are a motor trader that has customers visiting your premises or anyone that’s not staff regularly attending your business site, then you might want to ensure that your policy includes Public Liability insurance. A motor trade premises, whether it’s a body shop or a tyre fitting workshop, can be a dangerous place even for those who are trained to work there, let alone members of the public.
It only takes one moment of distraction for a member of staff to leave a tool lying around where a customer could easily trip over it, sustaining an injury in the process. It’s not just a mechanic’s workshop that needs Public Liability insurance though; for example if you own a valeting business, a customer could trip over a hosepipe lying on the ground. There are countless scenarios for all types of traders, but if you have customers/members of the public visiting your motor trade premises and you DON’T have Public Liability insurance, then you could be faced with costly legal bills should an accident occur.
Public Liability insurance isn’t just for traders that have customers visiting their premises. You could benefit from having it included in your Motor Trade policy even if you’re a mobile mechanic as it can protect members of the public when you’re undertaking work on the side of the road, for example.
Damage to third party property (by your business) is also covered under a Motor Trade insurance policy that includes Public Liability.
Product Liability Insurance
Sometimes referred to as Sales & Service Indemnity for Motor Traders, Product Liability insurance is designed to protect your business against claims from customers for damage caused by the work you carry out or the parts that you fit. This can be someone you’ve sold a car to or someone whose car you have worked on in any capacity.
If you’re a mechanic, a tyre fitter or any other type of motor trader that fits parts or works on cars then you will want to make sure that your Motor Trade insurance policy includes Product Liability. It doesn’t matter how professional and thorough you are, mistakes and accidents happen. Protecting your motor trade business against claims resulting from your work on a client’s car is something you should seriously consider when taking out your policy.
One of the common misconceptions about Product Liability is that it’s only for motor traders that replace or add parts to client cars, such as mechanics or body shops. However, it can be useful for traders that sell cars. For example, if you sell a car to a customer, having done the necessary checks on the car and deeming it roadworthy, and on their way home the steering fails causing them to have an accident, a claim could be made against you.
Employers’ Liability Insurance
The majority of motor traders with employees will need to have Employers’ Liability insurance included when they take out a Motor Trade insurance policy as it’s a legal requirement - exceptions can be found on the Government website.
If you don’t take out Employers’ Liability insurance you could be fined £2,500 for every day you didn’t have insurance for. You can also be fined £1,000 for not displaying your EL certificate or refusing to make it available when asked by inspectors. In addition, the Employers’ Liability policy you take out must cover you for at least £5 million and cover must be provided by an authorised insurer.
Being a legal requirement isn’t the only reason that you should include Employers’ Liability insurance when taking out a policy; it also further protects your business for the same reasons Public Liability cover does, in case of an accident.
Business Interruption Cover
If you’ve made sure your Motor Trade insurance policy includes Buildings & Contents cover you may think that you’re covered for loss of earnings in the event that your property is damaged. However, that isn’t the case. In fact the Buildings & Contents cover would only repair the damage incurred.
Most Business Interruption insurance will cover your business if you are unable to trade due to disaster, damage or stolen property, allowing you to claim for a loss of income. For some motor trade businesses this could make a huge difference to their chances of survival after something like a flood.
When taking out Business Interruption cover as part of your Motor Trade insurance policy make sure you know exactly what you’re covered for, so that there are no nasty surprises.
Get the right cover for your business
Some traders will be looking for cheap cover whereas others will be on the hunt for the best policy that money can buy. However, there could be a sweet spot right in the middle! The best policy might not necessarily be the right one for you; Yes, it might cover everything, but you may end up taking out unnecessary cover for things you don’t need such as Demonstration cover on a Mobile Mechanic insurance policy. On the flip side, opting for the cheapest policy might not provide enough cover, such as not having Demo cover as a used vehicle seller, or something else fundamental to the running of your business.
Speak to a specialist
If you’ve got any doubts about what type of policy you need and what you should include, then we always recommend speaking to a specialist broker such as ourselves. At Think we have over 30 years of experience in Motor Trade insurance, and any member of our specialist team will be happy to help you get the right cover for your business.
Keep the MID up to date
For many traders, there will be a requirement to regularly update the Motor Insurance Database (MID) due to the amount of vehicles used and owned, so remember if you have any temporary vehicles such as hire cars or courtesy vehicles, or customer’s car is in your possession for more than 14 days, you must update the MID. Find more information on updating the MID by reading our What is Motor Insurers Database FAQ.
Other tips for reducing the cost of your cover include increasing your policy Excess, building up your No Claims Bonus, looking at where your vehicles are parked or stored, and providing proof of trading to demonstrate you run a legitimate motor trade business. All of these things, if managed properly, can help reduce the cost of your cover.
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Motor Trade Insurance >>
- 1 What Is Motor Trade Insurance
- 1.1 Good Motor Trade Insurance Video
- 1.2 Road Risk Insurance
- 1.3 Combined Insurance
- 2 Understanding Motor Trade Insurance
- 2.1 Whats The Difference Between Car Insurance and Motor Trade Insurance
- 2.2 What Levels Of Cover Are Available For Motor Trade Insurance
- 2.3 Three basic levels of cover are available
- 3 Who Needs Motor Trade Insurance
- 3.1 Vehicle Sales Insurance
- 3.2 Mechanics Insurance
- 3.3 Body Shop Insurance
- 3.4 Vehicle Recovery Insurance
- 3.5 Tyre Fitters Insurance
- 3.6 Valeters Insurance
- 3.7 Car Jockey Insurance
- 3.8 Mobile Mechanics Insurance
- 4 Top Tips For Motor Traders