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Motor trade insurance - the basics

Anyone who runs a business dealing with cars and other vehicles needs motor trade insurance. It's a legal requirement. Garages, dealers and mechanics all need it - but so do car valeting services. If you're looking after customers' cars, you need at least basic third party insurance.

What's so special about it?

It's different from basic car insurance because it covers customers' cars as well as cars that you or the business owns - as long as they are being driven by one of the drivers specified on the policy. Traders can usually add vehicles to cover when they acquire them, and take them off the policy once they're sold. Motor trade insurance can also cover liability risks on your premises - for instance, if a customer slips and falls on your forecourt - and can cover your tools and equipment, as well. For those with employees, employer's liability insurance is a legal requirement, and can often be added to the general motor trade policy.

What should it cover?
Motor trade insurance can be split into road risks (when you need to move vehicles) and liability insurance. It may prove economical to buy a combined policy that covers both types of risk.

Although the legal requirement is only for third party insurance for road risks, a comprehensive policy can offer much more. If a member of staff of a car valeting company is driving a customer's car for delivery, and has an accident, the damage wouldn't be covered by a third party policy; under a comprehensive policy, the trader wouldn't be too much out of pocket.

Some things are more expensive to insure than others. Drivers under 25 may find it hard to get motor trade insurance; dealers specialising in sports and high performance cars may also find road risks insurance is costly. You should also note that policies make a number of standard exclusions; they often won't insure vehicles owned by your employees, or vehicles over 7.5 tonnes (unless specific cover has been obtained).

If you deal with customers in Europe, it's nice to know that many policies will cover you for driving abroad, though the policy may specify a maximum length of trip or number of trips per year.

What other cover may I need?

Legal expenses cover may be worth considering. Customers often threaten legal action against garages when they think their bill is too big, or are unhappy with the work done - legal expenses cover can help keep your business out of trouble.

Looking carefully at your business can help you reduce your insurance costs. Think about which employees will drive (over 25 and with no points on their licences, preferably!), and where cars are parked (preferably not on the street). Added security at your premises can help reduce the chances of theft. You may also find that your personal no claims bonus can be transferred to a motor trade policy, reducing your annual quote.

Think carefully about what you need before you start getting quotes. Getting the wrong insurance - however cheap the premium - can leave you out of pocket in the long run.

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