The Ultimate Guide to Motor Trade Insurance – Updated for 2020

Date: 29th August 2020 |  Author: Mark Bowers
car mechanic motor trade

Everything you need to know about motor trade insurance in one complete guide

Whether you’re new to the motor trade industry or you’ve been trading for years, getting motor trade insurance is essential. But how do you know what insurance you need, and who can you trust to offer the best deals?

Our ultimate guide to motor trade insurance tells you all you need to know about:

Reading this guide will only take a few minutes, but it could save you a small fortune if you follow our advice to get the right cover for what you do.

Read on to find the answers to the most common questions motor traders have about insurance.

Who needs motor trade insurance?

Motor trade insurance provides cover for anybody who works in a motor trade business. This could be:

Motor trade insurance is only available to those working in the trade, so you’ll need to provide proof of your business before you get a quote. If you’re new to this, or have questions even after trading for a while, we’re here to help.

What levels of insurance cover are available for motor traders?

No matter what you do in the trade, it’s worth understanding the different types of motor trade insurance first. Once you understand the types of insurance on offer, you can then select the level of cover that you need.

Motor trade insurance can be broken down into three types:

Road risks insurance

Everyone working as a motor trader who drives vehicles needs road risk cover.

Road risks insurance allows you to drive vehicles in connection with your work on a third-party, third-party fire and theft, or comprehensive basis. This means you can legally:

  • Drive any vehicles you own in connection with the motor trade
  • Drive customer vehicles, e.g. to check repairs or move them from one location to another

Some traders may not need this cover – for example, body shops or paint sprayers, where vehicles do not need to be taken out on the road. For most traders though, road risks cover is the minimum legal requirement to set up in business. Without it, you will not be covered for driving vehicles under your custody and control (left by customers) or your own vehicles.

Like private motor insurance, there are three levels of road risks insurance cover available:

  • Third-party only – the minimum cover you can buy. Covers injury to third parties while you are driving a vehicle in connection with the motor trade. This includes injury to their person, vehicle or property, but does not provide cover for the vehicle you are driving.
  • Third-party, fire and theft – in addition to third party only cover, adds fire damage and theft cover to the vehicle in your possession.
  • Comprehensive – offers the highest level of road risks cover possible, adding insurance cover for the vehicle you are driving to the above covers.

Things to remember with road risks cover

  • Comprehensive road risks cover often only covers the trade value of your vehicle, not the resale value.
  • Several vehicles can be included on a road risks policy. Each one will be subject to the excess on the policy if a claim is made, so make sure the excess selected (compulsory and/or voluntary) is affordable.
  • You need to add any vehicles you buy for motor trade sales to the Motor Insurance Database (MID), so they are covered under your policy. You do not need to do this if you are servicing/repairing or transporting a customer vehicle (their own insurance will already be on the MID).
  • If you sell a motor trade vehicle, you will need to remove it from the MID. If you don’t, you will remain responsible for any incidents involving the vehicle – including accidents, motoring offences and parking tickets!

With all of this, if you’re unsure what’s best for you then we can offer advice to help you out. Simply give us a call on 01625 854458 to speak to our road risks team about the best option for you.

Traders combined insurance

While road risks insurance is a must to drive vehicles, traders’ combined insurance covers many of the other areas you might want motor trade insurance for.

As the name suggests, a combined motor trade policy combines road risks insurance with a range of other insurances, all specially designed for motor traders. These include:

  • Cover for business premises – If you own a garage or showroom, you are responsible for insuring the buildings. If you rent your premises, your landlord may have buildings cover, but make sure you check with them. Getting the right level of cover here is important, and it’s no different to insuring any other building: you need to cover the rebuild cost. Imagine trading without your premises, and you’ll see the value of this insurance.
  • Cover for stock of vehicles – With business premises, you’ll likely be storing vehicles on-site – especially if you are selling vehicles on a forecourt. This means you’ll need cover against damage or theft of these vehicles. That’s where stock of vehicles cover comes in.
  • Tools and equipment stored on-site – The cost of replacing specialist tools and equipment can be sky-high. Secure your premises, then get this cover to avoid literally being left without the tools to do your job. Successful claims can be paid quickly, allowing you to get on with running your business.
  • Demonstration cover – If you’re selling vehicles, you’ll need people to be able to test drive them. Prior to Covid-19, accompanied demonstration cover was the norm, allowing dealers to travel with people test driving vehicles. However, it’s now possible to get unaccompanied demonstration cover, so drivers can safely test vehicles by themselves (with appropriate security checks carried out first).
  • Product liability – What happens if you fit a faulty part to a car, and something happens as a result? Or you sell a car in good faith that has had a good part incorrectly fitted? Product liability cover – also known as sales and service indemnity insurance, or defective workmanship cover – provides cover for this, in case of injury to a person or damage to a vehicle sustained as a result. Legal costs can be covered for any claims lodged against you as part of this policy.
  • Money cover – If you have money stored on-site, there’s always the danger of theft. Money cover can protect against this danger, for any well-secured business premises.
  • Engineering inspection cover – Any plant or machinery used in the service or repair of vehicles will need to be inspected by law. Our engineering inspection policies offer this service for an additional fee, running alongside your motor trade policy, to ensure you stay on the right side of the law.
  • Management liability insurance – Covers you personally as a business owner or senior manager against claims made against you. While your business may be covered, it’s important that you are, too, in case a personal claim is made when something goes wrong in a business you are responsible for. Don’t risk your home and personal possessions in defending claims – speak to us about how this cover (also known as directors’ and officers’ insurance) can work for you.
  • MOT loss of licence cover – MOT testing stations rely on their licence to operate. If you were to lose your licence, you would lose valuable income – and if MOTs are the only service you offer, you won’t be able to trade at all. Getting insurance cover against this could be a lifesaver – though there are obviously terms applied under which this cover will pay out.

More covers are also available. Simply speak to us regarding your circumstances, and we’ll make sure you have everything you need to insure your motor trade business effectively.

Some of the covers listed above can be purchased separately alongside a road risks policy, but most of them are only available in a combined motor trade policy. The advantage of motor trade combined insurance is that it saves you money by bringing everything together in one package.

Public liability and employers’ liability insurance for motor traders

Because you’re dealing with members of the public in your motor trade business, you could find public liability insurance very useful. It offers insurance if a member of the public is injured on your premises or in connection with your work. An example could be if they slip or trip in your workshop.

This cover can be added to a road risks only policy or can come as part of a traders combined policy.

Employers’ liability cover is generally part of the same package. This is a legal requirement for anybody who employs somebody to work on their behalf (e.g. a mechanic). It provides cover for injuries to employees while they are working.

How to save money on your motor trade insurance

Road risks insurance

  • Transfer or mirror private car no claims bonus – This is a top tip if you’re just starting out in the motor trade. You can transfer your no claims bonus (otherwise known as no claims discount) from a private car or commercial vehicle policy to your motor trade policy. This can help you save money when you first take out cover. The only disadvantage is that you often can’t transfer no claims bonus back to your personal policy if you shut down your motor trade business (though Bollington do have access to an exclusive policy for this). Another option is to mirror your no claims bonus. This means you get to keep the no claims bonus on your private motor policy as well as applying it to your motor trade policy. The drawback with this is that you keep your private motor policy running alongside your motor trade policy, so it can cost more. However, the advantage is that if you’re new to the trade and decide it’s not for you – or you have a specialist vehicle that can’t be covered under a motor trade policy – then you have the option to cancel your motor trade policy and still have no claims bonus on your private vehicle.
  • Consider increasing the voluntary excess on your road risks policy – If you work in the trade, chances are you will be able to make cheap repairs to vehicles, or you’ll know someone who will. Increasing your excess may make sense, because you don’t need to rely on insurers to step in for minor claims if you can afford the cost of repairs yourself. There’s another reason why you might want to increase your excess…
  • Get excess protection cover – This is specialist cover that will pay out the excess on your policy if you make a claim. The advantage of taking this cover is that you pay a small premium to cover the excess, so you don’t lose out financially if you do have to make a claim – you can simply claim back the excess you have paid when the claim is settled. Speak to us if you want a quote for this cover. Because it pays out every time a genuine claim is made, you might find this is a cost-effective, cheap way to get motor trade insurance cover.
  • Comprehensive cover might be cheaper overall. While third party only or third party, fire and theft policies might be slightly cheaper than comprehensive policies, you might find the extra cover worth paying for if you have a claim. Weigh this up against the costs saved by opting for cheaper cover, and the fact you might be able to repair damage cheaply yourself.
  • Avoid dealing in high performance or modified vehicles – While some insurers will cover these – especially for specialist businesses – you’ll generally find they are more expensive to insure if you can get cover for them. Think of a private motor policy – these are more desirable vehicles, so are more likely to be stolen or involved in accidents. That’s why it’s more difficult to get cover for these vehicles on a motor trade policy. However, if it’s your specialist business to work with these vehicles, we may be able to help – just be prepared that it won’t be as cheap as a standard motor trade policy!
  • Add your commercial vehicle to your motor trade policy – If you work as a builder but sell a few cars as a side-line, you can add your commercial vehicle to your motor trade policy (subject to insurer). This can save you money overall, as you don’t need a separate policy for this vehicle anymore.
  • Only name experienced drivers, or those with good driving history, on your policy – Younger drivers can be covered on a motor trade policy, but it can be more expensive (there’s more on this later). Where possible, add drivers to the policy with no (or few) points on their driving licence, and a history of no claims. Just like a private motor policy, the more experience a driver has, and the better their driving record, the less of a risk they might be to an insurer.
  • Keep driving to a minimum and avoid rush hours – The less time on the road, the less likely you are to make a claim. And the less time spent in dense traffic, the less likely it will be that an accident involving another vehicle might occur.

Traders Combined Insurance

    • Make sure you have the right amount of cover for your stock of vehicles – Levels of stock and types of vehicle will vary from time-to-time. However, don’t be tempted to underinsure your stock; motor trade insurers might not pay out if a theft occurs and the value of stock exceeds the amount you are insured for. Even if they do, you will lose out if you don’t have the right level of indemnity to cover your vehicles.
    • Improve security on your premises. Any approved security measures are likely to be viewed favourably by insurers. Why? Because they show that you are taking the protection of your stock, tools, equipment, and money seriously. Some things you can do here include:
      • Install approved alarms
      • Secure perimeter fencing
      • Install pull-up bollards and/or lockable external gates
      • Install trackers into vehicles you use yourself
      • Install approved CCTV cameras and ensure footage is backed up to the cloud
      • Make sure any money or valuables are locked away in a safe when access to them is not needed – including keeping vehicle keys in key safes
      • Restrict access to facilities for members of the public
  • Take health and safety seriously. Health and safety management is always important, with employers having a duty of care to their employees. Servicing equipment regularly, and making risk management part of your everyday work processes, helps ensure a safe working environment. It’s also very important to ensure a Covid-secure workplace, too. Likewise, ensuring members of the public are protected from slips, trips and falls, and kept away from live working environments, is a must. Getting all this right lowers the likelihood of claims, keeping insurers happy. Bollington can even provide free online risk assessments and specialist advice from risk managers – just speak to us for details. This can potentially lower the costs of your insurance through safe systems of work and improved risk management.
  • Don’t pay for cover you don’t need. This is where specialist advice from Bollington can really help. Our experts listen to what your business does so we can offer all the covers you need, and nothing that you don’t. Underinsurance is a problem – not having sufficient cover, then finding yourself wanting to make a claim , or being on the receiving end of a claim from someone else is a nightmare for any business.

What is the difference between part-time and full-time motor trade insurance?

Most part-time traders work from home. You will possibly be selling a few vehicles as a side-line to another main job, or doing occasional work as a mobile mechanic or recovery driver.

Full-time traders are more likely to work from business premises. You may have a garage or a forecourt, a showroom, or a storage facility.

Part-time traders generally want road risks insurance only, whereas full-time traders may require traders combined insurance. But the type of insurance you need is more to do with the type of business you run, rather than whether you work part-time or full-time.

Bollington can cover all types of motor trade business – whether part-time or full-time – but it will depend on your circumstances and what you do. The insurance we provide is essentially the same for everyone, but the larger your business, the more insurance products you might need.

Motor trade no claims discount – tips and tricks

We’ve already spoken about transferring or mirroring no claims. Once you’ve started building a no claims discount, though, how do you keep hold of it and make the most of it?

Here’s four top tips to help:

  1. Keep the number of claims you make to a minimum – While you have a duty to report accidents to your insurer, you don’t have to make a claim. For example, if you bump a vehicle while parking it and there’s no other vehicle involved, does it make sense to claim on your insurance? Again, knowing people in the trade means you’ll often be able to repair the vehicle yourself. By making as few claims on your insurance as possible, your insurance company will see you as less of a risk. That means they’re more likely to offer a cheap road risks policy to you when it comes to renewing your insurance.
  2. Choose an insurer with higher levels of NCD – most insurers allow you to get a discount for up to five years, but Bollington offer access to insurers that allow up to 7 years NCD.
  3. Keep hold of your proof of no claims – insurers will generally need proof of NCD to honour it, so make sure you keep your renewal documents from your existing insurer to prove you have NCD.
  4. Protect your NCD – Check whether your motor trade insurer allows you to protect your no claims discount. If you can, it can help you maintain a discount for years to come.

Why is it more difficult to get motor trade insurance for under 25s?

Just like private motor policies, under 25s and young motor traders find it more difficult to get good value motor trade insurance. This is because for insurers, motor trade insurance premiums are all about risk. Young or inexperienced drivers are statistically more likely to be involved in accidents – and with access to more vehicles, the risk in the motor trade is even greater.

All is not lost, though. You can get under 25s motor trade insurance if you work in servicing and repairs, for example. The minimum age for motor trade insurance is 21 for mechanical repairs, as there is no road risks element here.

To get road risks insurance, you need to be at least 23 years old. Here are some additional points to consider:

  • Private car insurance policy – It might be helpful if you have experience on a private car policy first. After passing your driving test, build up your experience and no claims discount. You can then, in years to come, look to transfer or mirror your no claims discount to your motor trade policy. This can help keep the costs down when setting up your own sales business with a road risk insurance policy.
  • Work with older motor traders - Build up your motor trade experience by working for someone else first. Don’t strike out alone – you can build up experience by being a named driver on a more experienced motor traders’ policy. This helps you get knowledge and learn the trade before you ‘become your own boss.’
  • Avoid high-performance vehicles - Only drive smaller, lower powered vehicles. Avoiding sporty cars, imports, luxury vehicles or performance vehicles is a necessity for younger traders. This is again due to the risk associated with high performance vehicles, and as a young motor trader, you want to try and reduce your perceived risk to insurers.

Remember, you might be able to get young motor trade insurance, but it’s unlikely it will be cheap. Bollington are one of the few brokers who might be able to help, so request a quote from us if you’re a younger trader looking for insurance.

Saving money on your Motor Trade Insurance

Bollington have been helping businesses save money on their traders insurance since 1973. We’re one of the largest and most well-known motor trade insurance brokers in the UK.

How do we save you money?

  • We’re not tied to one insurer – as a broker, we have access to a wide panel of insurers, to offer cover for as many businesses as possible
  • We offer access to exclusive products – we can give you insurance you can’t find elsewhere, including access to our own insurer, Holava Underwriting, to give you quality cover at highly competitive prices
  • We give you advice – we’re not just here to take your money. We’re here to give you the help and assistance you need to make sure you get great value cover that meets your needs
  • You benefit from our experience – we’ve been looking after the motor trade for decades, so we’ve seen tens of thousands of businesses. That means we can find the right cover for you by understanding your business better than any other broker
  • Everything is backed with award-winning service – from a Feefo Platinum Trusted Service and Investor in Customers ‘Gold’ award winner

Don’t waste your time with other companies. Come to a respected broker. Bollington will take the stress out of the process by shopping around for the best motor trade insurance for you.

 
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