Is Motor Trade Insurance Mandatory?
There are lots of people working in the motor trade, from mechanics and MOT testers to part-time car dealers and recovery operators.
What if you are starting out for the first time? How do you know what insurance you need?
Our latest guide explains:
- When motor trade insurance is a legal requirement
- What types of insurance you will need to have
- When you might consider optional covers for a motor trade business.
When do you need motor trade insurance?
If you start to sell vehicles, or service or repair them to make a profit – or a combination of these – then you have a motor trade business.
From the moment you first purchase a car, motorbike or van with the intention of selling it on rather than owning it, then motor trade insurance becomes a consideration.
But what if you’re only buying and selling one or two vehicles a year? Do you legally need motor trade insurance?
And what if you just help your friend occasionally by repairing their car and charging them for your time and the parts you fit, but you spend the rest of your time fixing vehicles you own as a bit of hobby? Does motor trade insurance become mandatory then?
Technically speaking, the answer is no. You need to sell or service/repair a minimum number of vehicles to get motor trade insurance.
In these circumstances, you’re more likely to be the owner or registered keeper of vehicles you sell, so they will be transferred into your name before you sell them. A friend is also more likely to consider you as someone they can trust to help them out, rather than a businessperson who they will have legal comeback against.
Which leads to another common question we get asked:
How many vehicles need to pass through your hands before you get a motor trade policy?
The answer to the question is: it depends on your business!
As a responsible motor trade insurance broker, we will speak to our customers to find out about your intentions including:
- Potential vehicles you will be selling or working with, including numbers, vehicle types, engine sizes etc.
- Where you will be working
- What specifically you will be doing in the motor trade, and
- The scale of your business…
…amongst other things, so we can determine whether a motor trade policy is the right insurance policy for you.
What do you need a motor trade policy for?
You need a motor trade policy to:
- Provide cover for vehicles that are passing through the motor trade, i.e. you purchase them from another trader, an auction, online, in person from a private seller or through any other legitimate trade, with the intention of selling them to make a profit.
- Get cover for customer vehicles you are working on. When customers hand over the keys to their vehicle to carry out a service or repair, they are trusting you to look after the vehicle and return it in the same condition as when it arrived with you. To be able to drive vehicles in your care, custody and control, you need motor trade insurance.
- Cover you against liability claims. Especially important as you get more established or you have a larger business, to protect you against claims of alleged injury from members of the public, or any employees you might have.
- Cover for business premises. Motor traders who are starting out for the first time usually sell vehicles from home. However, if you have a lock-up garage or storage facility, you’ll need cover for your buildings and contents, including tools, equipment and money on-site. You’ll also need cover for the stock of vehicles you have at any given time.
What’s the legal requirement for motor trade insurance?
If you’re driving vehicles in connection with a motor trade business, then road risks insurance is the legal minimum insurance required. The types of cover are similar to private car policies: you can get third-party, third-party fire and theft or comprehensive cover, though normally you will be covered for the trade value rather than the sale value of the vehicles in your possession.
Should you have employees that aren’t family members, employers’ liability insurance is a mandatory requirement as part of your motor trade insurance cover.
It is also a legal requirement to have any equipment used in your business (such as lifting tables, ramps etc.) safety tested on a regular basis. Our optional engineering inspection cover will help you meet this legal requirement, if this applies to you.
What insurances are optional?
While it isn’t a legal requirement, we highly recommend taking out public liability insurance to protect yourself against claims in connection with your work from members of the public. In fact, public liability insurance is usually included alongside employers’ liability insurance anyway.
How do I get motor trade insurance?
We hope our guide has been useful in answering:
- Which motor trade insurances are mandatory
- Which options you should consider
- When you need to buy motor trade insurance
However, if you need further advice, our expert motor trade team are on-hand to help!
We offer advice on which motor trade insurance products you might need, how to keep your costs down, and even whether you need motor trade insurance or if a private car policy is the best option for you.
We will search a panel of motor trade insurers to get you the best deal we can. And should the worst happen, our in-house claims team to work on your behalf to resolve any issues.
So, to get motor trade insurance from the leading UK motor trade insurance broker, give Bollington a call on 01625 854458 and find out how we can help you get the right policy for your needs.