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When using your vehicle for business purposes, if something goes wrong, your personal car insurance policy won’t necessarily pay out. That’s because there are a surprising number of everyday work situations where business car insurance is required.
Find out when you need business car insurance, what it covers, and the various policies available below.
When do I need business car insurance?
If you are driving on roads in the UK, you need to have car insurance by law. Whether or not you need specific business car insurance, however, depends on how you use your vehicle for work.
If you only commute to and from one place of work, you should be able to use your standard car insurance if you have a social and commuting policy. Make sure you check your policy in detail so you have the cover you need.
That said, some work-related activities that may require different types of business car insurance include:
- driving to work sites or meetings at different locations
- running business-related errands during working hours
- door-to-door selling
- moving stock
- making deliveries or collections
- driving clients or business associates in your vehicle
- letting colleagues drive your car
If you do any of these as part of your business operations, you will need to take out a business car insurance policy.
Meanwhile, if you use your vehicle primarily for business purposes, such as a taxi or lorry, you need commercial vehicle insurance.
What does business car insurance cover?
As with personal car insurance, there are three main types of cover you can buy:
- Third party only insurance (TPO). This is the legal minimum requirement by UK law, and covers costs associated with injuries and damage to others (including vehicles and property) caused by your driving. Damage to you and your own car is not covered.
- Third party, fire and theft insurance (TPFT). This includes compensation for a third party in the event of injury or property damage, but also covers your vehicle if it is stolen, damaged or destroyed in a fire.
- Fully comprehensive. This offers full cover, including if your car is stolen, damaged or destroyed in an accident or fire. It can also cover personal injury after a collision and damage to or theft of your vehicle contents. This on top of the third party compensation included in TPO and TPFT.
» MORE: Types of business insurance
Classes of business car insurance
There are three classes of car insurance for business use: Class 1, Class 2, and Class 3. Each serves a different purpose, so it is important to choose the right one.
Class 1 business car insurance
On top of commuting and day-to-day personal use, Class 1 business car insurance covers driving to multiple places of work, including meetings and job sites.
Your spouse or partner may also be included on the policy, but only if their travel is for the business of the named driver, not their own job.
Class 1 business car insurance could be appropriate for most basic business car use. This could be building site managers who drive to multiple locations, home carers and cleaners visiting different households, or people having frequent, pre-arranged meetings with clients and customers off site, such as estate agents.
It is important to note, however, that Class 1 business car insurance does not cover activities such as door-to-door selling or making deliveries.
Class 2 business car insurance
The major difference between Class 1 and Class 2 business car insurance is that you can have an additional named driver on a Class 2 policy that isn’t your spouse.
So, for example, if you are a small business and need an employee to run a business errand in your car, or want a co-worker to go to a meeting using your vehicle, you should opt for Class 2 insurance.
As with Class 1 business car insurance, Class 2 business car insurance doesn’t cover door-to-door selling and deliveries.
Class 3 business car insurance
This offers the most cover and is the most expensive of the three classes.
Class 3 business car insurance is for people who clock up a lot of miles in their car but don’t use it for commercial purposes.
Typically, it is used by door-to-door salespeople making unarranged visits up and down the country while transporting a small amount of products. This is different from making deliveries, where you need commercial car or courier insurance.
It also comes with all the coverage included in Class 1 and Class 2 business car insurance.
Other types of business car insurance
Alongside the three main classes of business car insurance are a number of other options for more specific business activities.
Commercial car insurance
You need commercial vehicle insurance if you first and foremost use it for business purposes. This could be a taxi or cab, minibus, van, or limousine, as well as larger transport types, such as heavy goods and agricultural vehicles.
This kind of cover would be required by taxi drivers, Uber drivers, driving instructors, and chauffeurs of any kind. There are specific commercial insurance policies for each of these professions.
You may want to consider a commercial vehicle insurance broker to make sure you are getting the specialist insurance you need.
Delivery and courier insurance
Another form of commercial car insurance is courier insurance, be it for a car, van, moped, or motorcycle.
If you make deliveries, regardless of whether that is food or other goods, you need a policy that includes carriage of goods for hire and reward cover.
Therefore, if you are a Deliveroo or Just Eat driver, or deal with furniture removal, you will need to look into some form of courier or delivery driver insurance.
Business breakdown cover
Not every business car insurance policy will come with business breakdown cover. Therefore, to make sure you can get your vehicle fixed and back on the road as soon as possible you may need to take out a separate breakdown policy.
Temporary business car insurance
If you only need business car insurance for a short amount of time – for example, driving your own car or someone else’s for a one-off business trip – you can look into temporary business car insurance. This tends to cover periods from as short as one hour up to 30 days.
Company car insurance
If you drive a company car, and the car is owned or leased by your employer, then it is their responsibility to insure the vehicle.
How much is business car insurance?
Given the sheer number of different types and levels of business car insurance, the cost can vary greatly from person to person and business to business.
However, there are consistent factors across most types of business car insurance that will help decide your premium. This includes:
- how much you use your car
- the industry you work in
- if you are carrying any goods or equipment
- the make and model of your car
- where your car is parked overnight
- the class of business insurance you require
- the level of cover you opt for
- the excess you choose (the sum you pay towards any claim)
Shopping around and comparing insurers can help you find the right level of cover at the lowest price.
» MORE: Why is car insurance so expensive?
How can I get cheaper business car insurance?
There are a few factors that might make your premium a bit cheaper.
- Make sure you get the right level of cover: You don’t want your car to be underinsured, but you also don’t want to waste money on overinsuring your vehicle.
- Carefully consider the model of car before you buy: For example, engine size and fuel efficiency can affect your premium.
- Park your car in the safest place you can: Ideally park off-street or in a secure garage.
- Install extra security devices: Consider alarms, immobilisers and steering wheel locks.
- Pay your premium up front: If you can afford it, pay annually rather than by monthly instalments. This can bring down the overall cost.
- Opt for black box, or telematics, insurance: This is where your insurer monitors your driving habits and rewards safe or efficient driving with a reduced premium.
» MORE: Do I need business insurance?
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