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Levels of Indemnity – Getting the Correct Cover

What are the best levels of cover for my motor trade business and what are the repercussions of not having the correct cover? As a rule of thumb, price is not always a good way to compare what you are getting. It’s not necessarily all about the cheapest motor trade insurance; check the levels of indemnity to make sure you are fully protected. This is something Bollington Motortrade has much experience of and can help to guide you through.

What are Levels of Indemnity?

The level of indemnity refers to the highest amount that the policy will pay out regarding any one event. In other words, how much your insurers will cover you in each individual occurrence when a person or persons make a claim against your company.

A level of indemnity must be able to cover the worst case scenario, and just getting the cheapest motor trade insurance may not be the best option. For example, what if several individuals make a claim against you all at once due to one act of negligence on yours or your company’s part? The levels that are required are determined by the levels of risk involved. Factors which are not at all relevant include the size of your company or the relationship to the party or parties making the claims.

Public liability, employer’s liability and professional indemnity all have their own levels of indemnity; in other words, the levels at which they meet the sums that the policyholder is legally obliged to pay in compensation.

Public Liability Insurance – also referred to as third party insurance, covers the policyholder for injury or damage sustained to a third party, resulting from the policyholder’s negligence. Legal costs are also covered by this.

Employer’s Liability Insurance – covers the policyholder for injuries sustained by their employees resulting from the policyholder’s negligence or breach of a statutory duty. For example, an employee is injured whilst moving equipment in the trade garage. The Health and Safety Act requires all organisations with employees to have this type of insurance.

Professional Indemnity Insurance – covers the policyholder for losses they may be required to pay out as damages regarding financial loss due to error or professional negligence. Most kinds of motor trade are a specialist service and thus require this type of indemnity insurance. For example, you have incorrectly fitted brake pads on a vehicle – you will need defective workmanship cover as part of your PI cover. Anything which might cause an accident or incident to happen to the vehicle after you have worked on it, which you should reasonably have been expected to have sorted out, could be cause for a negligence claim.

What are the repercussions for not having the correct cover?

If you have incorrect cover or fail to supply correct data it can be taken as a criminal offence. All registered road vehicles must be part of your cover, but unlike personal use cars, vehicles registered as ‘in trade’ with the DVLA are excluded from CIE (Continuous Insurance Enforcement). Motor traders have up to 90 days to register as the keeper of useable road vehicles in their possession.

Vehicles exempt from CIE include non-road SORN-registered vehicles or those scrapped or disposed of, for example cars at a scrap yard.