03 December 2024
What is Motor Trade Insurance?
5 minutes
If you regularly work with vehicles, whether you’re selling them, repairing them, or providing specialist services, you need to have motor trade insurance in place. But what is motor trade insurance, exactly, and how does it work?
Motor trade insurance goes beyond standard car insurance, providing comprehensive coverage that protects you, your employees, your premises, and your customers’ vehicles while they’re in your care. Let’s explore it in a bit more detail.
What is motor trade insurance?
First things first, what is the meaning of motor trade?
The motor trade refers to individuals and businesses involved in buying, selling, repairing, or working with cars, vans and motorbikes. The industry includes car dealerships, mechanics’ workshops, vehicle repair centres, mobile mechanics, valet services, and vehicle recovery operators. If you regularly handle other people’s vehicles as a business at any scale, you’re considered part of the motor trade.
And motor trade insurance?
As the name suggests, motor trade insurance is a specialist type of insurance designed to protect the people and businesses working in this industry. Unlike standard car insurance, motor trade insurance covers multiple vehicles, whether they belong to you, your business, or your customers. And it often includes important liability cover, which can help to protect you in the event that your employees, customers, or a member of the public lays a claim against you.
Motor trade insurance is built to be flexible and easy to adapt. Insurers know that the needs of large and established dealerships are very different to hobbyists who dabble in classic car restoration part time. As a result, they’ll likely carefully assess your business in order to draw up a policy that suits your specific needs. Working with an experienced broker can be helpful, too.
How does traders’ insurance work?
When you apply for motor trade insurance, your insurer or broker will evaluate how you run your business. They might ask you questions like:
- What’s the exact nature of your business (for example, sales, repairs, valeting)?
- How many years’ experience do you have in the motor trade?
- Do you operate from business premises or work from home?
- What types of vehicles do you work with, and what’s their maximum value?
- How many vehicles do you handle per year?
- Who needs to be covered to drive the vehicles, and what are their ages and driving histories?
- Where are vehicles stored overnight?
- What security measures do you have in place?
- Have you had any claims in the past five years?
- What’s your estimated annual turnover?
These answers help insurers understand your level of risk and determine the most appropriate cover for your business. From there, they’ll likely recommend that you take out road risk insurance, liability insurance, or combined motor trade insurance:
- Road risk cover allows you and your employees to drive any vehicle connected with your motor trade business legally on public roads. You can choose to buy this type of insurance on its own if you wish. If you do, you’ll likely pay less than you will for a combined policy, but you won’t be as comprehensively insured.
- Liability insurance helps to protect your business against claims from employees, customers, and others who engage with your business. It integrates different types of liability cover depending on what your business needs, and may include public liability, employers’ liability, product liability, and professional indemnity insurance. Remember that, if you employ people on any basis, even if they work for you voluntarily, you have to have employers’ liability insurance in place.
- A combined insurance policy bundles multiple types of coverage into one package, providing you with the most comprehensive protection. This all-in-one solution typically includes road risk and liability coverage, as well as any extra add-ons you might require, such as premises insurance and protection for your tools and stock.
Can anyone get traders’ insurance?
No, not everyone will qualify for motor trade insurance. Insurers have specific eligibility requirements that you will have to meet in order to qualify. These measures help them ensure that their policies are being used for legitimate business purposes.
Unsurprisingly, the most important criteria is that you must be actively working in the motor trade industry and be able to prove it. This means you’ll need to demonstrate that a significant portion of your income comes from motor trade activities. You’ll typically need to provide evidence such as business accounts, trading receipts, or your company’s registration documents.
Insurers will also look at your personal information such as:
- Your age (many insurers require motor traders to be at least 25 years old)
- Your driving history and any previous claims
- Any criminal convictions
- Your experience in the motor trade
- Your credit history and financial standing
Insurers are especially vigilant about preventing people from misusing motor trade policies in order to insure multiple personal vehicles more cheaply. If you can’t prove you’re genuinely working in the motor trade, your application will likely be declined.
Motor trade insurance: FAQs
Let’s take a look at a few common motor trade insurance-related questions.
What is the average cost of motor trade insurance?
It’s quite difficult to establish an average cost of motor trade insurance. After all, a major dealership that trades several hundred cars a month requires very different insurance to a part-time auto electrician who only works on the weekends. And the cost they pay in premiums will be similarly varied.
Take a look above at the questions your insurer or broker are likely to ask you when they put a quote together. The answers to these questions will likely influence the fees you’re charged, with things like larger premises or more valuable cars boosting your premiums.
You can also read more here: How much is motor trade insurance?
Can I drive any car on a motor trade policy?
While it might be tempting to think that you can drive any car because you have a motor trade policy in place, you might want to read the fine print. Many policies have conditions in place on the types of vehicles you’re permitted to drive, and may not include high-performance vehicles or classic cars. Make sure you know exactly what you are and aren’t covered for before you get behind the wheel.
Do you need motor trader insurance if you work for a motor trade business?
If you’re an employee at a motor trade company, your employer should have their own motor trade insurance in place. If you’re unsure how their cover extends to you, be sure to chat to them about it. It’s especially important that you’re protected if you have to drive a customer’s vehicle.
If you’re a business owner, your motor trade insurance is your responsibility to arrange and maintain. Carefully consider which types of insurance best suit your business so that you’re comprehensively insured.
Do you need motor trade insurance if you work from home?
Yes, you still need motor trade insurance if you work from home. And you also need it if you only work in the motor trade part time, too. If you’re earning an income off your motor trading activities, both the DVLA and HMRC will consider you a motor trader and you will therefore need to have motor trade insurance in place.
Quickfire summary
Whether you’re a seasoned motor trader or just starting in the industry, having the right insurance is crucial to protecting your business. From road risks to liability coverage, the right policy can give you peace of mind and allow you to focus on providing exceptional services to your customers.
At Howden, we understand that every motor trade business is unique. Our experienced brokers can help you navigate your various options and find a policy that perfectly matches your needs and budget. Get in touch with us today for a personalised quote.
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