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Motor trade insurance explained

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If you work in the motor trade or a car-related business, you’ll need specialist motor trade insurance.

This type of insurance covers activities by people and businesses in the motor trade, including service and repairs to car dealers, vehicle sales and restoration. 

Motor trade insurance insures your company and staff for the use of vehicles in the day-to-day running of your business. Standard car insurance isn’t applicable in the motor trade, as it can’t be used for commercial purposes.

This guide explains what motor trade insurance is, who needs it and how much it costs.

What is motor trade insurance?

Motor trade insurance policies are designed to protect people who earn their livelihood by repairing, selling or buying cars or undertaking any work related to cars or other vehicles.

You’ll need this type of insurance if you run a company that has customers’ vehicles in its “care, custody or control.” You can insure all your staff on the same policy.

Businesses that need motor trade insurance include mechanics, breakdown recovery firms, valeting companies and car dealers. This type of insurance covers business owners and employees when they’re driving or working on customers’ vehicles and those owned by the business itself.

You can get motor trade insurance whether you work full-time or part-time in a motor trade business. 

What does motor trade insurance cover?

Motor trade insurance covers vehicles that are in your care as part of your business and vehicles owned by your business. 

Exactly what’s covered varies from policy to policy, but motor trade insurance normally falls into two categories:

  • Road risk insurance
  • Combined motor trade insurance

What is road risk insurance?

If you take vehicles onto public roads (eg delivering cars to buyers or testing cars to check faults), road risk cover makes sure that the vehicles under your care and those you own are protected.

Road risk cover is a core part of motor trade insurance and works a bit like standard car insurance – you can choose from third-party only, third party, fire and theft or comprehensive cover. 

You need a minimum of third-party insurance to legally drive on UK roads. This covers damage to third-party cars and property and other people’s injuries. Third party, fire and theft covers all these elements plus fire damage to and theft of vehicles in your care.

A comprehensive policy goes further and covers loss or damage to the vehicle you’re driving and your own injuries.

Road risk insurance can cover customer vehicles left in your care and control, such as a car left for servicing at a garage. It also covers cars your business is buying and selling, as well as business vehicles (ie a breakdown truck).

However, a motor trade policy is purely for cars being worked on or sold in the trade, so you can’t include other people’s vehicles unless they fit this definition.

What is combined motor trade insurance?

With a combined motor trade policy, ​​you’ll be covered for road risks, along with any additional coverage your business needs. 

A motor trade combined policy might include:

  • Accidental damage cover: as the name suggests, this covers accidental damage caused to a customer’s vehicle and can be useful for businesses that clean, repair, tow or test customers’ cars
  • Business premises cover: this insurance is for the structure of your buildings, whether you own or lease your premises. It can also cover tools and equipment kept at your premises, such as specialist diagnostic and repair tools, ramps, lifting tables and portable hand tools
  • Employers’ liability cover: this is a legal requirement for motor trades that employ staff; it protects a business from legal costs and compensation if an employee is injured while at work
  • Public liability: this ensures that you and your workers are covered against any injury or damage claims made by customers or members of the public while on your premises
  • Product liability: this covers you if someone takes legal action against you due to faulty parts

Other things motor trade insurance cover might include are:

Do I need motor trade insurance?

According to Think Insurance: “If you are responsible for the care of any customer’s vehicle(s) or hold the custody of a vehicle which is to be tested, repaired or sold then you will require motor trade insurance for the protection of your customers, their vehicle(s) and your business.” 

It also adds that this type of product “is strictly for businesses that produce an income as a result of working with cars.”

Both limited companies and sole traders can take out motor trade insurance, and you’ll need it whether you operate from the business premises or from your home. 

The following businesses need motor trade insurance:

  • Businesses that buy and sell cars (ie car dealers or car auctions) or sell or fit vehicle parts and accessories
  • Garages that offer MOTs, servicing and repairs
  • Airport parking companies (which move customers’ cars)
  • Vehicle delivery firms 
  • Car jockeys (those who move/park other people’s cars) 
  • Car valets 
  • Tyre and exhaust fitters
  • Scrapyards
  • Vehicle breakdown and recovery agents 
  • Specialist vehicle collectors and restorers
  • Vehicle repossession businesses

Can I get part-time motor trade insurance?

If your main job is in another trade or business type but you service or sell vehicles for extra income, you can buy a part-time motor trade policy.

As a part-time trader, you’ll need to prove that you’re working within the motor trade. Proof might include receipts to show the purchase and sale of vehicles or car parts. Some insurers will set a minimum number of vehicles you need to work on to be eligible for motor trade insurance. 

You can buy a part-time motor trade insurance policy to suit your needs. Cost will vary depending on:

  • Your specific motor trade
  • The level of cover required
  • The value of your premises, tools and equipment
  • Your location
  • Your volume of work

How can I get cheap motor trade insurance?

As with any type of insurance, it’s important to shop around and compare premiums and policy details from different insurers for motor trade insurance.

Here’s how to find cheap insurance:

  • Don’t add unnecessary extras to your policy: only pay for the cover you need
  • Only work on standard vehicles: cover is more expensive for high-end, classic or imported vehicles and for motorcycles, HGVs or specialist vehicles
  • Limit the number of personal vehicles you own and vehicles you’re working on: the more vehicles you need to insure, the more it will cost
  • Pay a higher excess: a higher voluntary excess could lower your premium, but make sure it’s an amount you can afford in the event of a claim
  • Secure your premises: locate your business in a safe area and install security measures, especially for overnight vehicle storage
  • Check staff driving records: hire staff over the age of 25 with good driving records. When staff leave the business, remove them from the policy
  • Add staff as named drivers: having named drivers is cheaper than opting for “any driver” cover 
  • Pay annually rather than monthly: monthly premiums tend to be more expensive because they include interest
  • Try to build up a no-claims bonus: some insurers will mirror a private car bonus for a road risk policy
  • Supply accurate vehicle values: being more accurate with estimated values keeps you from overpaying on insurance
  • Use an insurance broker: a broker that specialises in motor trade insurance can sometimes shop around to find you a better deal

Motor trade insurance FAQs

Motor trade insurance is different to business car insurance.

You need business car insurance if you use your own car for work or business reasons, which could include driving to business meetings, travelling to a training course, conference or event and travelling between your company’s different sites or offices.

In contrast, motor trade insurance is necessary if you work in the motor trade or a vehicle-related business.

You normally need to have held a driving licence for at least a year and to have lived in the UK for a minimum of three years to get motor trade insurance.

Some motor trade insurers will only insure people aged 25 or older, although a few will consider drivers aged 23 and upwards. 

Anyone with a criminal conviction will find it difficult – although not impossible – to get motor trade insurance. Also, people with excessive motoring convictions or driving bans may struggle to get a competitive insurance quote.

No, you can’t drive just any car – such as those owned by family or friends – if you have motor trade insurance.

Policies are designed to allow you to run a car-related business and to drive your own vehicles and customers’ vehicles to do so.

emma lunn

Emma Lunn

Money Writer

Emma Lunn is a multi-award winning journalist who specialises in personal finance and consumer issues. 

With more than 18 years’ experience in personal finance, Emma has covered topics including mortgages, first-time buyers, leasehold, banking, debt, budgeting, broadband, energy, pensions and investments. 

Emma’s one of the most prolific freelance personal finance journalists with a back catalogue of work in newspapers such as The Guardian, The Independent, The Daily Telegraph, the Mail on Sunday, and the Mirror. 

As a freelancer she has also completed various in-house contracts at The Guardian, The Independent, Mortgage Solutions, Orange, and Moneywise. She also writes regularly for specialist magazines and websites such as Property Hub, Mortgage Strategy and 

She has a real passion for helping people learn about money – especially when many people are struggling to get by in today’s challenging economic climate – and prides herself on simplifying complex subjects.