Understanding motor trade insurance and how it affects your business

All vehicles that operate on public roads in the UK for either public or commercial use require third-party insurance, as defined in the Road Traffic Act of 1988. However, those involved in the motor trade require specialised insurance. As with domestic car insurance, the terms, conditions and cost of this insurance can vary depending on various factors, such as the type and size of vehicle being driven, the number, age and experience of the drivers that are to be insured, the type of goods that are to be conveyed by the vehicle, if any, and the nature of the business that you are operating.





Most basic policies for motor traders insurance, such as car dealerships, that are intended to be used for commercial purposes encompass three elements. The first of these is road risk insurance, which is a legal requirement for all vehicles associated with the business while they are being driven on public roads. The second is a public liability and sales of goods premium, which protects the business from any potential damage that may be incurred against the vehicles of a company by a third-party. This premium also covers employees of the business for any injuries they incur while in the company’s vehicles, whether as driver or passenger. Finally there is a material damage component, which protects vehicles, and also buildings, against any damage that may be incurred while on the premises of the business.

The type of activities that take place at your business will affect your quotation. For example, many insurers consider the types of activities involved in vehicle salvage and dismantling to be more hazardous, and will charge you accordingly. Possessing rare, expensive or performance vehicles amongst your fleet will also inflate your premium. Also while it is tempting, and often a practical necessity, to have as many employees as possible named on an insurance policy, one should be aware that this can often escalate the cost of your policy by hundreds of pounds. Generally it is advisable to keep the named drivers restricted to the fewest number of people possible, not the most.

Finally, one of the most important things to be aware of when applying for motor trade insurance is that the insurer will wish to see some proof that you operate as a motor trader, as many insurers have had to deal with individuals applying for motor trade insurance with the desire to simply be insured to drive any vehicle. In reality, they were not insured to drive any vehicle, as motor trade insurance only covers vehicles for which there can be a legitimate commercial purpose shown, which will be confirmed by insurers in the event of an accident. So be prepared to display proof of your business, and the nature of it, when you apply for motor traders insurance.

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