Understanding How Motor Trade Insurance Works

If you work in the motor trade, you’ll likely have been told you need motor trade insurance, but what is it and how does motor trade insurance work?

If you work in the motor trade, you’ll likely have been told you need motor trade insurance, but what is it and how does motor trade insurance work? As experts in the trade, we understand it can seem a complicated beast to the uninitiated. In this blog post, we’re going to look at what motor trade insurance is and who it’s for, how it works, what road risk cover is, combined cover, liability insurance, policy duration and renewal, common concerns and how to get a motor trade policy.

Introduction to Motor Trade Insurance

Defining Motor Trade Insurance

How does traders’ insurance work? Motor trade insurance is specific cover for those who work in the motor trade. It’s a series of insurance policies designed to protect against the specific risks associated with the industry. Policies can cover everything from driving customers’ cars on the road to protecting your investment in case your property is damaged.

Who Needs Motor Trade Insurance

For anyone who works in the motor trade, appropriate insurance is an absolute must. Some level of cover is a legal necessity, but aside from that, without it, your entire business could be at risk, just one or two calamities away from collapse.

You’ll need motor trade insurance if you’re a:


  • Vehicle dealership
  • Mechanic or garage operator
  • Vehicle transporter
  • Breakdown and recovery service
  • Tyre fitter
  • Vehicle tuner
  • Scrap yard or breaker
  • Vehicle accessory shop
  • Auction house
  • Auto locksmith
  • Vehicle restorer
  • Anyone else involved in the motor trade

Understanding of Motor Trade Insurance

Functionality of Traders’ Insurance

Each motor trade policy will be slightly different and built around the risk areas of your individual business. Your policy will be constructed to provide a safety net below any potential weaknesses in your business. So, if, for example, you operate a part time car dealership, then your stock is vulnerable to theft and vandalism. In response, your motor trade policy will offer financial security if this happens.

Differences from Private Car Insurance

How does motor trade insurance work compared to private insurance? Well, private car insurance is designed to protect you and others from the financial implications of road accidents as well as vandalism or theft of your vehicle, but that’s all. Motor trade policies are a form of business insurance, designed to keep your business protected should the worst happen.  

They are much more comprehensive in their scope, covering everything from moving vehicles on the road to employer’s liability insurance.  

Exploring Road Risk Cover

Fully comprehensive is the most extensive level of insurance coverage. Building on the lower levels of cover, it also covers damages to the insured’s vehicle, even if they are at fault in an accident. Typically it covers the vehicle for accidental damage, vandalism and in some cases, personal injury to the driver and may also offer add-ons like cover for personal belongings in the car, legal expenses and breakdown assistance. The higher cost provides a higher peace of mind for the insured.

Importance and Scope of Road Risk Cover

Road risk cover forms the cornerstone of any motor trade insurance policy. It’s the base level of cover required for a motor trade business to operate legally. These policies cover the use of vehicles under your ownership on public roads and offer financial protection in case they cause damage to anyone else’s property.

Coverage Levels Available

Road risk insurance is broken down into three levels of coverage, much like private car insurance. These three levels are:


  • Third party only – As the most basic form of coverage, third party only road risk insurance covers only the cost of any damages caused by you to other people’s property. It doesn’t cover the value of your vehicle or claims for fire or theft.
  • Third Party, Fire and Theft (TPFT) – One step above standard third party policies, third party fire and theft options offer the same base level of coverage but also extend to protecting you in case your vehicle is stolen or damaged by fire.
  • Comprehensive – We often recommend comprehensive coverage, as it protects you in all cases. As well as everything covered in TPFT policies, comprehensive policies will shield you in case of accidents where you’re at fault.

Overview of Traders’ Combined Cover

Comprehensive Protection for Motor Traders

Now we’ve looked at road risk only policies, how does combined traders’ insurance work? Combined policies are built to protect the business as a whole, not just specific activities or risks. Your business represents a major investment on your part as well as your source of income and leaving it uninsured is a huge risk to take, which is why we would always recommend our customers opt for combined policies.

Components of Traders’ Combined Policies

By their very nature, combined motor trade policies are modular. They can be built of as many smaller policies as needed to cover the potential risk areas your business presents, as these vary from operation to operation. As well as covering you to use vehicles on the road, combined policies often cover things such as damage to your business premises, engineering inspections, directors' and officers’ insurance and sales and indemnity.

Importance of Liability Insurance for Motor Traders

Legal Requirements and Recommended Coverage

There are some facets of motor trade insurance we’d highly recommend and some that are legal requirements. Motor traders must, as a minimum, have third party road risk insurance. However, we’d recommend to almost all of our clients they consider more extensive combined insurance.

Your business is your livelihood, and represents a major investment, but is, at any given point, just a few knocks away from potential collapse. Issues such as employee disputes, stock theft or even freak weather damage can come at any time, and without adequate insurance, could cripple most businesses. For tips about what key factors to consider when buying your motor trade insurance, or some common mistakes to avoid, check out our blog posts.

Significance of Employers’ and Public Liability Insurance

Lawsuits are expensive, very expensive. Whether they come from the public or from your own employees, they can be financially damaging and could even cost you your business. At Prime Cover, we can build employers’ liability and public liability into your combined motor trade policy to cover your costs if you should find yourself staring at a court date 

Duration and Renewal of Motor Trade Insurance

Policy Duration and Renewal Procedures

At Prime Cover, we always strive to work in ways that best suit our customers and can flex your policy around the needs of your business. Your policy duration can be discussed when you contact us for a quote, and we’ll inform you of our renewal procedures at this point too. If you’re still wondering ‘How does motor trade insurance work?’, just drop our friendly team a line and we can answer any questions you might have.

Options for Instalment Plans

We want to make quality insurance as affordable as possible for all motor traders, which is why you can choose to pay for your insurance in a lump sum or with monthly payments to help spread the cost. To find out more about paying for your motor trade insurance policy in instalments, contact our team today. For tips on reducing the cost of your motor trade insurance premiums, check out our blog post.

Addressing Common Concerns

Why Traders Need Liability Insurance

Liability insurance is hugely important for motor traders. Without it, you’re vulnerable to lawsuits from members of the public should some aspect of your business cause them harm or financial loss. People could claim against you for anything from legal fees to medical bills, and the processes associated with this could put a heavy financial burden on your business.

Consequences of Operating Without Proper Insurance

By operating with improper insurance, or even no insurance at all, you leave your business incredibly vulnerable. Not only could you be in breach of the law, but unexpected events could topple your business overnight. With so much invested in your business, why would you even consider leaving it exposed to entirely preventable risks?

No matter how safe and resilient you think your business is, there’s no accounting for freak events.

Conclusion and Next Steps

You could argue we’re biased here, but we believe thorough insurance is one of the most important parts of building a healthy, resilient business. The chances of your business going without ever encountering potential hazards, whether that’s property damage or lawsuits, are minimal at best. Insurance is your safety net and shouldn’t be overlooked.

To get your free, bespoke motor trade insurance quote, just get in touch with Prime Cover today. Our expert team can build a policy to suit the exact needs of your business and provide a safety net against the risks you face. You can request a quote in five minutes using our easy online form or contact our team on 01527 433 434 or support@primecover.co.uk.