How Does Motor Trade Car Insurance Differ from Private Car Insurance?

insurance policy

By law, you need insurance to drive in the UK.

Whether you use your own car for private journeys, or you drive cars for business use, you need the right insurance to meet your needs.

How do you know which insurance is right for you?

Our guide explains:

Private car insurance

Private car insurance provides cover for your car when you are the registered keeper and owner.  The exception to this is when you are named as a driver on somebody else’s private car policy, or when you take out temporary cover.

Private car insurance covers you to drive for social, domestic and pleasure purposes – in other words, for your personal, private use.  Most policies will also cover travel to and from a single place of work (i.e. commuting).

Separate business use cover can be arranged. This allows you to drive your own vehicle on business appointments. It does not provide cover for professional use like deliveries or motor trade work, for example. You will need a separate commercial vehicle policy if you want to use your own vehicle for work purposes – e.g. a builder’s van.

Private car insurance comes in three familiar forms:

  • Third-party only – covers injury claims from members of the public and claims for damage to their property. Offers no cover for your own vehicle.
  • Third-party, fire and theft cover – adds cover for fire damage to your own vehicle, and for theft of your own vehicle
  • Comprehensive – offers all the above, plus cover for damage to your own vehicle

Some private car policies will allow you to drive other cars, typically on a third-party only basis. If you are involved in an accident, you will be responsible for the cost of any damage to the vehicle you are driving with this level of cover.

Private car insurance only covers cars you own and generally only covers one car. Multi-car policies at one address are available, but they are restricted to cars owned by family members. They are not suitable for business purposes.

Motor trade insurance

Motor trade insurance is different to a private car policy in many ways.

The motor trade policy you need to drive vehicles is called road risks cover. While the cover provided for driving is similar, it is designed for motor trade businesses. This means that you can:

  • Drive cars that you don’t own. This allows you to test drive customer vehicles following repairs, or move them around your premises, for example. They remain insured while under your care, custody and control, without affecting the owner’s private car insurance.
  • Drive cars that are passing through the trade. If you buy a car and intend to sell it, you will not want to become the registered keeper, as you will only own the car on a temporary basis. Your motor trade policy can cover vehicles that are for sale, up until the point the vehicle is sold.
  • Be insured when customers take a car for a test drive. If a potential buyer takes a car for a test drive, they need to be insured in case an accident happens. Your motor trade insurance policy can cover this.
  • Drive all types of car covered by your policy. Instead of being restricted to driving a particular make and model, you can drive all cars permitted under your policy. There will likely be some exclusions, such as high performance or high-value cars, for example. However, you can drive a range of cars that you might buy, sell, service or repair, all under one policy.
  • Name multiple drivers on one policy. This means you can add employees to your policy, such as mechanics and salespeople, so they have the same level of cover to carry out their work.
  • Drive cars for personal use that you own. You can be covered for social, domestic and pleasure use for vehicles you own under your motor trade policy. However, this is only a part of your policy – if you do not conduct motor trade business, you cannot cover vehicles for personal use only on your policy.
  • Drive a commercial vehicle you own (with some policies). Some commercial vehicles can be driven under a motor trade policy. For example, if you are a full-time builder and part-time motor trader, you can cover your van and your motor trade business under one policy.

Like private car insurance, road risks insurance provides third party only, third party fire and theft, or comprehensive cover. The difference with comprehensive cover is that it will only cover the trade value of the vehicle on most policies – so if you want full protection for a vehicle you own, you may still be better with a private car policy.

You can also get extra covers, such as cover for tools or your business premises, with your motor trade insurance. These covers are not available with a private car policy.

Switching from private car insurance to motor trade insurance

If you are starting up in the motor trade for the first time, or returning to the trade after an absence, then you can look to transfer your no claims bonus from your private car insurance to your motor trade policy.

There are pros and cons to doing this, as it can help to reduce your motor trade premium, but means you lose your private car bonus if you stop trading.

You can drive your own vehicle under a trade policy, but you are only eligible for a policy if you sell vehicles for profit.

You also have the option of mirroring your private car bonus on a motor trade policy, but this is normally more expensive as you need to keep your private car insurance alongside your motor trade policy. However, this can be useful if you drive a vehicle that might not be covered by a traders policy, e.g. a luxury executive car.

Speak to us if you need advice before taking out motor trade insurance.

What cover do I need – private or trade?

If you buy and sell cars, or service, repair or carry out any other business with them, you will need a motor trade policy.  If you just want to drive your own car, you need private car insurance.

Get a quote with ChoiceQuote for motor trade insurance and we’ll search our panel of insurers to offer our best deals for you.


  • Can I drive any car with traders’ insurance?

Unless your policy specifically says you can drive any car, the answer is no. There will normally be some restrictions applied to a motor trade policy. For example, high performance or luxury cars may be excluded, as may certain imported vehicles. If you require cover for these, please speak to us.

Likewise, some named drivers may have endorsements applied on the policy that restrict their use of some vehicles, e.g. inexperienced drivers or those with motoring convictions. Check your policy carefully.

  • Can I sell cars on my private, personal car insurance?

Anybody can sell a car they personally own that is covered by personal car insurance. However, if you are a genuine motor trader, not only is this an expensive thing to do (as it usually requires admin fees each time you change the insured vehicle), your business activity will not be covered. If you sell a few vehicles each year with the purpose of making money, then you need road risks insurance instead of a private car policy.

  • What happens if I sell cars but don’t have traders’ insurance? 

If you intend to make a profit by buying and selling cars, then you are breaking the law if you don’t have traders insurance. As above, if you only sell two or three cars a year (because you want to upgrade your family car or change the model you drive, for example), you will not be classed as a motor trader running a business. However, you will not be protected by insurance if you sell vehicles to make money, even on a part-time basis.