How does motor trade insurance work? Explained

Motor trade insurance can be complicated, especially if you’re trading for the first time. So, we’ve created a simple guide to explain how motor trade insurance works. Here you’ll find answers to the following questions:

What is motor trade insurance?

This is one of the most frequently asked questions we get, and the answer is surprisingly straightforward.

Motor trade insurance simply covers any activities undertaken by people and businesses working in the trade. These activities could include service and repair work, vehicle sales, restoration, or transportation. Any activity involving making a profit in the motor trade requires traders’ insurance.

Who needs motor trade insurance?

Anybody involved in buying and selling, servicing, repairing, restoring, or transporting vehicles needs motor trade insurance.

People and businesses who need motor trade insurance include:

How does trader’s insurance work?

Firstly, it’s important to point out that traders’ insurance is different to private car cover. Ordinary car insurance typically covers one vehicle with a named driver (or drivers). Multi-car policies are available, but you need to specify the vehicles and pay an administrative fee to change cars midway through your policy (known as a mid-term adjustment, or MTA).

Working in the motor trade often involves driving different customer vehicles. You might also be driving vehicles bought to sell for profit. The cars driven are likely to change constantly, so private car insurance won’t offer you the right cover.

Some private car policies will allow you to drive other vehicles, but this is for emergency use only — when you can’t operate your insured vehicle. What’s more, this insurance is almost always third-party only, so it won’t cover the cost if you write off your car, for example.

There are different levels of cover available depending on your needs. Most traders start with road risks insurance, and public and employers’ liability. Any other covers can be added to a combined motor trade policy.

Road risk cover

To drive customer vehicles or cars used to run your business, you need road risks insurance. The protection levels are the same as private car or van insurance: third-party, third-party fire and theft, or comprehensive cover.

You can drive customer vehicles temporarily left in your care, custody and control under the policy. You can also cover test drives with additional demonstration cover. You can also add or remove vehicles you buy and sell in the trade using the motor insurance database (MID). This means no MTA admin fees if you choose to do this yourself, using one of the online portals provided by motor trade insurers. This saves you time and money when you think about the number of vehicles you are likely to trade.

Not all vehicles are covered by a road risks policy. For example, there may be restrictions on sports cars or high-value cars, particularly for younger or inexperienced drivers. Road risks insurance also does not cover family or friends’ vehicles; it is designed for business use.

Traders’ combined cover

While almost all motor traders need road risks insurance, there is also a range of optional covers. These are often added individually to road risks insurance or combined into one policy. The latter is known as traders’ combined (or combined motor trade) insurance. Each type of insurance is designed to cover specific risks.

Traders’ combined cover can include liability insurance and protection for buildings, tools, and equipment. You can build your motor trade insurance policy to meet your needs.

A traders’ combined policy can include:

  • Public liability and employers’ liability. These two covers usually come as a package. They protect you against injury claims from members of the public or employees, respectively.
  • Business premises. If you have dedicated premises you work from – such as a workshop, motor trade garage, or sales forecourt – you may need cover for the buildings. If you lease premises, check with your landlord to see if they have buildings cover. If you own premises, calculate the cost of repairing or rebuilding them when deciding upon insurance.
  • Tools and equipment. This can include tools stored on-premises, diagnostic equipment, or portable hand tools. You may also need cover for ramps, lifting tables, compressors, or paint spray booths/ovens in body shops.
  • Money cover. For money stored on-site in connection with your work.
  • Engineering inspection. Qualified inspections of equipment, to satisfy Health and Safety at Work Regulations.
  • Sales and service indemnity. This insurance protects you against claims of damage or injury to people or property after selling or repairing a vehicle. It can include faulty parts or repair work that has directly contributed to an injury.

These are just some of the covers you might need. You can speak to an expert at Bollington, or read our ultimate guide to motor trade insurance for further information.

Why do I need traders’ insurance?

A motor trade policy is a legal requirement. Without a valid motor trade insurance policy, you aren’t covered to run your business. What’s more, you could face severe financial and reputational damage.

To avoid a costly mistake, make sure you take out road risks or traders’ combined insurance.

How long does a traders’ insurance policy last?

Motor trader insurance typically renews annually, just like a private motor policy. Some larger businesses benefit from reduced rates by taking out a combined trade policy over a longer period; three years is typical. These policies are not available to smaller traders, as they wouldn’t be cost-effective.

In most cases, you can spread the cost of cover with instalment plans.

Why do motor traders need liability insurance?

Any motor trader who employs staff requires employers’ liability insurance by law. Public liability insurance is also highly recommended. These covers protect against injury claims from employees and members of the public, and typically come packaged together.

Policies can include legal defence costs, as well as payment for any successful claims. Please note that if you have staff, employers’ liability cover is a legal requirement. Cover levels typically go up to £5m or £10m.

Get your motor trade insurance quote

To discuss your motor trade insurance today, call our dedicated team. For road risk insurance, please call 01625 854458 or for traders combined insurance, please call 01625 854443. To see what other services we offer visit our Motor Trade Insurance page.