Navigating Motor Trade Insurance for New Start-Up Businesses in the UK

Motor trade insurance for a new business is absolutely vital, as your venture is arguably at its most vulnerable to threats such as theft, vandalism, weather damage, lawsuits or any kind of unpredictable hazard. To help get you started, we will look at some key start-up insurance tips and considerations.

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Looking to Start a New Motor Trade Business?

If you’re taking the plunge and establishing a new motor trade business, you’ll be well aware of the costs and potential risks involved. Motor trade insurance for new businesses can help you mitigate some of these hazards and provide reassurance should the worst happen at this crucial time.

In this insurance selection guide, we’re going to help you better understand start-up motor trade insurance, why you need it, and how to choose the right policy for your business.

Do Start-Up Traders Need Specific Insurance?

No, start-up traders don’t need a specific kind of insurance, but rather the right level of cover that balances protection for their new business and associated investments with keeping initial overheads to a minimum.

It’s important to take stock of the assets your business has and your potential risk areas and opt for an insurance policy that suits your needs.

Understanding Motor Trade Insurance for New Businesses

Motor trade insurance is a necessity for all businesses that revolve around the sale, maintenance, repair or restoration of vehicles, regardless of size. The key difference when it comes to motor trade insurance for new businesses is simply the scale of the policy in terms of what it does and doesn’t cover.

It’s crucial, as a start-up, to work with an insurance provider that understands the motor trade sector and can apply its knowledge to crafting a policy that accurately covers all your relevant risk areas, without either leaving you exposed to risk or causing you to overpay for features you don’t need.

Introduction to Motor Trade Insurance

At this early stage in your business’s lifespan, it’s arguably at its most vulnerable to external threats. For example, a smaller stock level means that the theft, vandalism or crashing of just one or two vehicles could be hugely detrimental, and liability claims from the public could end up sinking your new business.

It’s crucial to have motor trade insurance from the very start of your business, not just for legal reasons, which we’ll touch on shortly, but also to protect you from potentially damaging everyday occurrences.

Types of Coverage for New Motor Trade Businesses

In the UK, motor trade coverage for new businesses comes in two main forms. The most basic is road risk only insurance, which provides the minimum level of legally mandated cover and allows you to drive your vehicles on the road. In turn, road risk policies are broken down into third-party, third-party fire, and theft (TPFT) and comprehensive cover.

Third Party – Third party road risk insurance provides cover for claims made against you should your vehicles cause damage to another person’s property but will not offer compensation for the cost of your own vehicle.

TPFT – TPFT insurance offers all the protections of third party policies but with the added coverage for damage to or loss of your vehicle caused by fire or theft.

Comprehensive – Comprehensive policies are the most thorough level of coverage available with road risk only insurance, providing cover for all eventualities.

When it comes to start-up motor traders’ insurance, these varying levels of cover may be useful for you at different stages of your business journey. For example, you could choose to start with a third party only policy, possibly with some extra features for added protection, to provide your fledgling operation with protection. As you grow and scale, you could then upgrade to TPFT and so on, as the value of your stock and the likelihood of accidents or other losses increase.

For more thorough cover as the value of your business increases, you can also opt for combined motor trade insurance. Combined policies blend multiple forms of insurance into one comprehensive policy designed to protect multiple facets of your business.

Tips for Choosing the Right Insurance

Each business is different, and choosing insurance for new start-up motor traders can seem like a minefield. However, there are a few key considerations you can make to narrow down your choices.

Key Considerations for New Motor Traders 

When your business is new, it’s important to balance the right level of protection with the need to keep overheads to a minimum. There are a few things to weigh up when choosing your policy:

Level of cover – You can vary the cost of your motor trade policy by adjusting how much of your business you choose to insure. When you’re starting out, you could opt to protect only your most valuable assets to minimise your initial costs.

Type of cover – You can opt for different kinds of cover, such as road risk only or combined policies, which will vary the level of cover you have as well as the price of the policy. When selecting start-up motor trade insurance, you could choose a less comprehensive level of cover such as third party or TPFT as your stock value is likely to be lower.

Your risk factors – Consider the potential threats to your business, including whether you operate in a high crime area, on a flood plain, or in an area of the UK prone to extreme weather. Prioritise cover that reflects your risk level, don’t underinsure yourself if your business is on a flood plain, for instance, but if you operate in a safe area, perhaps a lower level of cover will do.

Compare quotes – Don’t just go with the first insurer you get a quote from, shop around. Unlike with private insurance, you can’t use comparison sites for motor trade policies, so reach out to insurers directly. Not only can you directly compare what each insurer is offering and at what price, but you can also use quotes as a means of negotiating a better deal with different insurers. This is especially important in 2024, with premiums expected to rise drastically.

Legal Requirements in the UK

There are some specific legal requirements when it comes to start-up motor traders insurance, but also some common misconceptions.

Understanding the Legal Landscape

In the UK, legal requirements for motor traders when it comes to insurance can seem overwhelming. On the contrary, they’re quite simple:

Road risk cover – You must have some form of motor trade road risk policy to drive vehicles on the road. Driving without it or with just private insurance is as good as being uninsured and can land you in a lot of trouble.

Public liability cover – Depending on the size of your business and the way you operate you may need to consider public liability cover. It’s not a legal requirement but operating without it leaves you open to a great deal of risk. For example, if you operate a showroom, then it’s a de facto necessity, but if you’re selling cars from your own property, as many start-ups do, then the risk is much lower.

Employer’s liability cover – If you employ anyone who isn’t a family member, then you’ll need employer’s liability cover too. This is a legal requirement.

Aside from this, you’re free to scale your start-up motor trade insurance based on what you can afford and the specific risk factors that pertain to your business.

It’s a common misconception that new businesses can be hampered by insurance costs, but that’s not the case. By balancing what’s legally required of you with the right level of cover for your new operation, you can find a policy that provides all the reassurance and legal protection you need without breaking the bank.

Getting Motor Trade Insurance for Your New Business

Insurance for new start-up motor traders is key to nurturing your business as it grows, helping to shelter it from potential threats. It’s important to consider the level of risk you’re comfortable with, and the likely consequences for your new business should anything go wrong.

The biggest tip we can give you is to work with an insurance provider who understands the motor trade and can work with you to develop a bespoke policy tailored to the needs of your individual business.

At Prime Cover, we work almost exclusively in the motor trade and can provide you with expertly crafted motor trade insurance for your new business, suited to your needs and designed to protect it from threats often faced by new start-ups. Get in touch today for a free quote.