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If you use your car for work, or you drive to different locations as part of your job, you’ll need to have business car insurance. This type of cover means you’ll be protected by your car insurance policy if you use your personal car for work purposes.
Business car insurance is not the same as commercial car insurance.
You need business car insurance if you use your own car for work or business reasons. It excludes commuting – travelling to and from work – this is covered elsewhere on your car insurance policy.
Business or work reasons could include:
You might need business car insurance if you use your car for work-related purposes no matter if you are employed or self-employed.
Including business car insurance on your car insurance will mean paying a higher premium. This is because the insurer assumes you’ll be driving more miles, you might be driving on unfamiliar roads and that you’ll be travelling at busier times of day.
The more time you spend on the road, the higher your risk of being involved in an accident and having to make a claim on your insurance. So, the more your insurance will cost.
When you buy car insurance, the insurer will ask what you will be using your car for. There are three main categories, as follows:
This covers most day-to-day driving such as visiting friends or family, driving to the park or gym, going on holiday, carrying out household tasks such as supermarket shopping and ferrying children around.
Commuting means travelling to work and back – either driving all the way there or driving to the train station and leaving your car parked while you catch the train to work.
This category includes everything covered by the other categories, plus the business use reasons listed above. Before buying a policy it’s a good idea to check exactly what type of business use is covered as this can differ between insurers.
If you have an accident and don’t have the right cover in place, any insurance claim you make may be turned down. You could also be charged for driving without insurance – this is a criminal offence.
If you drive for business purposes, don’t be tempted to omit this information, or lie, when you apply for car insurance. This is known as ‘non-disclosure’.
If you only have SDP or SDP&C cover and you have an accident while driving for business reasons, your car insurance won’t cover you.
This can have serious repercussions, such as:
If you only use your car for business use occasionally, you can buy temporary business car insurance. For example, you might do this if you need to drive to a company away day as a one-off.
Short-term business car insurance is flexible, normally lasting from one hour to 28 days. You might be able to arrange temporary cover with the insurance company you have your personal car insurance with, or with a different insurer.
If you include business use on your car insurance policy, most insurers will ask you more questions about it.
Your answers will mean your cover normally falls into Business Class 1, Business Class 2 or Business Class 3.
Exactly what is covered in each class varies from insurer to insurer, but the following table offers a general guide.
| Class of cover | What it includes | Cost |
|---|---|---|
| Business Class 1 | Travelling to other offices or sites, to client meetings, or running work errands (for instance, taking cash to the bank) | £ |
| Business Class 2 | Everything in Business Class 1, plus a co-worker as a named driver who can do the same | ££ |
| Business Class 3 | Designed for people who travel long distances frequently, i.e. a field-based sales rep | £££ |
Business car insurance is different from commercial car insurance – so don’t get confused.
Business car insurance is when you use your car to do certain parts of your job, such as visiting clients or taking cash to the bank.
Commercial vehicle insurance is when driving is an integral part of your job role. This might include jobs such as:
It’s also important to point out that business car insurance differs from company car insurance. If you have a company car provided by your employer, you won’t need business car insurance as your car should be insured by your company.
The following table shows what is and isn’t covered by business car insurance, and extra cover that can be included for an additional fee.
| Covered | Not covered | Optional extras |
|---|---|---|
| Carrying clients or co-workers in your car | Colleagues driving your car (unless a named driver) | Driving abroad |
| Transporting stock samples or merchandise | Making regular deliveries of stock/merchandise | Courtesy car cover |
| Travel to conferences, events, training courses or company away days | Taxi, Uber or other hire services | Motor legal protection |
| Journeys to your company’s other offices or sites | Teaching other people to drive | Personal accident cover |
| Work-related trips to the bank, parcel depot or Post Office | ||
| Visiting customers or potential customers |
Adding business use will, in effect, mean paying a higher car insurance premium.
This is because people who use their cars for business usually drive more miles than other drivers. This driving is likely to be at busier times and, possibly, on unfamiliar roads.
The more you drive, the more likely you are to be involved in a car accident and make an insurance claim. If you’re seen as more likely to make a claim, your insurance premium will cost more.
How much business car insurance costs will also depend on other factors, such as your age, location, car make and model, claims history, driving convictions, where you keep the car at night and whether you add named drivers to the policy.
As an example, the following table shows how much Direct Line, one of the biggest UK insurers, would charge for business use compared to SDP and SDP&C.
Data is for a 30-year-old man driving an electric Toyota Rav-4 registered in 2018, driving about 5,000 miles a year, working as an admin assistant and living in South London.
| Use | Cost |
|---|---|
| SDP | £2,328 |
| SDP&C | £2,328 |
| SDP&C and business use | £2,479 |
| SDP&C and business use and named driver | £2,952 |
As you can see, adding business use would add £151 to the cost of a SDP&C policy, while it would cost an extra £624 to include a named driver for business use.
Business car insurance is normally taken out on your personal car – this means that you’ll need to pay the insurer the extra cost of business car insurance. However, some employers may offer financial assistance if you are required to use your own car for work purposes.
Most firms which require their employees to do a lot of driving will give their staff company cars which the company will insure under a ‘fleet’ insurance policy. Some organisations might use ‘pool cars’ which are used by more than one employee. Again, these will be insured by the company.
Every make and model of car is placed in an ‘insurance group’ between one and 50. Cars in group one are the cheapest to insure, and group 50 the most expensive. Fast, expensive cars with a lot of high-tech features are usually in higher insurance groups.
Research shows that drivers who leave it until the day their insurance is due for renewal could pay 50 per cent more than those who arrange it in advance. Give yourself time to shop around for cover and don’t just accept the renewal quote or let your existing policy ‘auto-renew’.
Young or new drivers might be able to save money by opting for a telematics or ‘black box’ insurance policy. With this type of insurance policy, your insurer will fit a gadget in your car that will monitor your driving habits and feed this information back to your insurer. Drive well and you’ll get cheaper cover.
It’s best to pay your premium up-front in one go each year. Your insurer may offer the option to pay monthly, but this will cost extra as, in effect, you are borrowing money for the whole premium and paying it back with interest.
A No Claims Bonus (NCB) will help to reduce your car insurance premium in the future. You can build a NCB by not making a claim on your policy. If you decide to switch providers, your NCB can be carried across.
Endorsements on your driving licence for speeding or other motoring offences will mean paying more for cover. If you are convicted for drink driving or using your mobile phone behind the wheel, the cost of insurance could rise significantly.
Security features such as an alarm or tracking device can both reduce the likelihood that your car will be stolen, and up the chances of it being recovered and returned to you if it is.
The ‘excess’ on a car insurance policy is the amount the policyholder pays in the event of a claim – then the insurer pays the rest. For example, if you make a claim for £2,000 worth of damage and the excess on your policy is £350, the insurer will pay £1,650. The higher the excess you choose, the cheaper your policy will be.
When you take out business car insurance, the insurer or price comparison site will ask you about the following:
| Your car | You | Your driving history | Your business use |
|---|---|---|---|
| Make and model | Date of birth | Type of driving licence | Business Class 1, 2 or 3 |
| Value | Where you live | Year you got your licence | Named drivers |
| Security and modifications | Declarable medical conditions | Previous claims | Industry you work in |
| Engine size | Marital status | Motoring convictions | Business mileage |
| Year of registration | Occupation | If you have ever had insurance declined | Job role |
| Where the car is kept | Homeowner status | No claims discount | Use by any driver |
You can get quotes for business car insurance by:
“Make sure you tell your insurer that you plan to use your car for work-related reasons. If you don’t have business use on your policy and then need to make a claim due to an accident on a work-related journey, you may find your policy is invalid.”
You might need temporary business car insurance if you need to use your car for a one-off business trip – driving to a company conference, for example. Most insurers will add temporary business cover to your policy for one hour to 28 days – so give your insurance company a call.
Yes, a named driver can be added to business car insurance. This will be categorised as Business Class 2.
No, you won’t need to do this. If you have a company car, your employer will arrange insurance.
