Despite the similarity of names, motor trade insurance is fairly different from the typical motor vehicle insurance. The differences stem from the nature of the policies; the former is principally a form of commercial insurance, the latter a private policy for individual motorists.
Like private motor insurance, motor trade policies come in a variety of levels of cover like third party, third party fire and theft and comprehensive insurance. Unlike car insurance though, motor trade policies cover the driver – not the driver and the vehicle.
Basically, car insurance protects a specific driver in a specific vehicle. Motor trade protects a driver for any vehicle he or she drives for the purposes of motor trade (not for just driving to the shops) that is also his property.
As you can imagine, this is extremely useful for people in the motor trade. It provides insurance when taking a demonstration drive, or for testing customer vehicles for part-exchange or second-hand purchase. It also provides cover for driving vehicles from storage depots to showrooms, or in the case of larger organisations, between separate showrooms.
If motor trade insurance operated exactly the same way as other forms of motor insurance, it would be a nightmarish procedure to just complete the day to day business of the motor trade. Not only because of the potential costs of driving uninsured – but because even if you’re in the motor trade, it’s illegal to drive a car on the UK’s public roads without insurance.
Of course, given that these vehicles represent a motor traders life and blood (as well as a significant initial financial investment. Third Party is the minimum legal requirement but it won’t offer peace of mind to anyone in the motor trade. more so than private vehicle owners, a motor trader needs to be able to at least recoup losses on theft or fire (a car park full of stationary vehicles presents more targets than a single vehicle in a driveway or garage).
For those in the second-hand trade, the more likely comprehensive insurance will come in useful. Not only because potential customers will likely insist on a test drive but also because if the trader is purchasing a car from a private individual, they will definitely take it for a drive before deciding. Any kind of accident that happens during that time could be massively damaging to the business.
Motor trade insurance also extends to other areas of liability than comprehensive private policies. Firstly, although its not compulsory for motor traders as a business with public premises it can be incredibly costly if the operator fails to provide a safe environment; just like supermarkets and high-street shops, motor traders have a duty of care obligation in the common law.
Additionally, the motor trader is likely to need employers liability insurance; it’s legally required if you want to employ anyone from a part-time car washer to a full-time salesman or mechanic.