How does motor trade insurance work?
We have previously covered the process of getting motor trade insurance, and some of the considerations you may need to take into account on your way to getting such a policy.
This time, we are putting motor trade insurance policies under the microscope to answer the question of how they work. What exactly do they cover? How can this coverage be extended? And what will happen if – or when – something goes wrong?
Motor trade insurance is a vital tool for anyone working in the motor trade industry, as it covers you and your company’s employees each time a vehicle is taken onto the road, whether it belongs to you or to a customer. From picking up cars to take back to your forecourt, to testing cars repaired in your garage, to test driving vehicles (with accompanied demonstration cover), road risk insurance – the core component of motor trade insurance – will ensure your business is protected in the event of accidents.
Such policies are usually tailored to a business’ specific requirements as a result, with costs incurred and coverage obtained varying to a large degree. As a result, it’s worth thinking about what kinds of risks and activities you need to be insured against, to make sure both that you won’t be surprised by a rejected claim or by high premiums.
Some of the key components of most motor trade policies include:
- Road risk cover
- If you or your employees drive vehicles on public highways, then you need this cover. It is the most basic component of most policies. This might apply if you are delivering customers’ cars back to them after providing a service, for example, or if temporarily taking charge of them. As with private and other motor insurance policies, this can extend to third-party, third-party fire and theft or fully comprehensive coverage. If, however, your business does not require vehicles to be driven on public roads, more basic coverage – such as parts-only cover – might be applicable.
- Employer’s liability insurance
- This cover can protect your business from claims made by your staff if an employee suffers injury or illness while carrying out their work. This is important if you have a workforce of any sort, regardless of whether they are driving vehicles or not; it is a legal requirement for the vast majority of businesses with employees. If in any doubt, check with your insurance broker – it can be a costly mistake not to have this cover in place.
- Public liability insurance
- Although not legally required, this is very important for any business that deals with members of the public, as motor traders do. If a member of the public were to be injured or suffer damage to their person or property as a result of your business activities, then public liability insurance helps to provide cover for the costs of defending claims. This can include provision for loss of earnings and damages. Costs can be considerable, so without this cover, just one claim could be enough to put you out of business.
- Product liability insurance
- Provides cover if products fitted to a customer vehicle are defective or damaged, causing injury or loss to a third party as a result. This cover will help with legal costs incurred in defending claims, as well as pursuing legal action against those who have supplied faulty or damaged parts to your business.
- Material damage cover
- This aspect of motor trade insurance will cover any vehicles and equipment you own. Examples might include your unsold vehicle inventory if you run a motor dealership, or your tools if you run a repair shop. This cover could be worth even more in peak new buying and registration periods – typically March and September.
- Multiple drivers
- Most policies will cover named drivers on your business’ books, while others will offer an “any driver” provision that covers anyone who works for you. This feature is likely to make premiums more expensive but can be more convenient if you have a number of people. Many will also allow for both part time and full-time traders to be included, though this can depend on what other occupations the policyholder has.
- Different vehicle types
- While most policies cover cars and vans by default, extra provision can be made for anything from motorcycles to HGVs. These, again, may be more expensive policies, so it’s important to make sure your policy only covers you for the vehicles you need to drive.
- Combined motor trade insurance
- These all-star policies may include many of the aspects covered above, with road risk and material damage included as a minimum. Combined policies will often also include your motor trade premises, whether a showroom or commercial garage. By bringing all your insurances together in one package, these policies are easy to administer and budget for (as everything you need insurance for has one renewal date). They also make it easier to ensure all the relevant aspects of your business are covered sufficiently.
There are certain insurances you will certainly need to carry out your work, with road risks insurance as a bare minimum. Liability insurances are also very important; imagine the costs involved in not just defending claims, but paying out compensation to those involved. Could you afford not to be insured?
While adding additional cover may cost you more upfront, there are also ways of driving down premiums that might be of interest.
No claims bonuses are a way to drive down the cost of your motor trade insurance. Not only can you build up and transfer a motor trade no claims discount, but for those of you who haven’t already got a motor trade no claims discount, you can often transfer your bonus from an existing private motor policy, or mirror it to keep your personal and motor trade policies separate.
Combined insurance can be made cheaper through several measures. In particular, if you’re looking to get your business premises included, costs can be avoided by increasing security on-site. This is of use most on a rented forecourt, that might be used by those selling or repairing car, with pull-up bollards, CCTV coverage and alarm systems all possible improvements that your insurer will consider when evaluating premiums.
Spread the cost with finance
Spreading the cost of payments using a finance facility can make it more affordable and manageable to insure your motor trade business. This is often an option with a good insurance broker, subject to acceptance by a finance provider. Although the overall amount you will pay may be higher (due to interest payments), this does mean that you can budget for the cost during the term of your payment plan.
Finally, though motor trade insurance is generally for policyholders aged 25 or older, some insurers will consider those aged 23-25. The right broker can help to find an insurer that could cover you. It may be cheaper for you to be added as a driver to an existing policy, rather than set up work in your own right, though.
With all of this in mind – and the details of your business considered – you should be ready to find motor trade insurance that ensures every aspect of your business dealings are covered, and keeps your premiums as low as possible.
For the best value motor trade insurance, get a quote with ChoiceQuote!