Motor trader insurance explained

The UK used car market is the largest in Europe, say consultants Strategy& in a major insight into the industry.

The driving force behind that market lies with the thousands of large and small-scale motor traders in the country who make their livelihoods buying and selling – as well as repairing, servicing and maintaining – cars.

For those businesses to survive the many risks of the market, motor trader insurance can provide an essential first line of defence – so let’s see why that is and how it works.

The principal elements of motor trader insurance

There are three main elements of insurance essential to any motor trading business – be that buying or selling cars, repairing, servicing and maintaining them, valeting or fixing and installing accessories:

Road risks insurance

• just as any other motorist, a motor trader has a legal obligation to insure any vehicle used on the roads or any other public place – the minimum level of cover is third-party, but third-party, fire and theft or comprehensive forms of cover provide protection against accidental damage;

• motor trader road risks insurance provides that cover but does so by insuring any named driver, regardless of the car or cars currently in the care and control of the motor trader;

• in this way, cover is provided both for the cars you intend to sell and others in your possession but owned by your customers – including those vehicles taken for an accompanied test drive by potential buyers;

Liability insurance

• the liabilities facing any business – large or small – are many and varied;

• public liability may be claimed by any customer, visitor to your premises, neighbour or member of the public who is injured or has their property damaged and holds you, as the business owner, liable;

• in the case of the motor trader, liability may also arise from claims of defective workmanship on vehicles you may have repaired, serviced or maintained;

• if you employ anyone to help run your motor trading business, the law says that you must have a minimum of £5 million (although £10 million indemnity is frequently sought by many business owners) of employers’ liability insurance;

• the cover is designed to ensure that you meet any claims raised by employees – past or present – who have been injured or contracted a longer-term medical condition through their work for you;

• an indication of the seriousness with which this legal requirement needs to be taken is given by the fact that fines of up to £2,500 a day may be imposed if you fail to arrange the cover;

Premises insurance

• just as the title suggests, this element of your motor trader insurance is designed to safeguard the premises from which you operate;

• equally important is cover for the essential tools, equipment and machinery any motor trader’s workshop is also likely to contain;

• cover is also provided for your own and customers’ vehicles kept on the premises, together with personal possessions within them;

• the theft of cash and other valuables from your premises may also be provided;

• in the event of an insured event forcing you temporarily to suspend trading, motor trader insurance may also offer compensation for the resulting business interruption.

Thus, motor trader insurance is designed to protect your business against the many and varied risks encountered in this sector of the market.