Motor Trade Insurance Explained – Don’t get caught out by Insurance small print!
Insurance is there to support and protect your business when the worst happens.
Most trade policies will include an excess or co-insurance clause, and it’s vital that you understand the finer details of your policy or you could find yourself left with an unexpected expense should you need to register a claim.
What is a policy excess?
An excess is an amount which you, as the policyholder, will be responsible for in the event of a claim or accident.
This is a familiar process across most insurance contracts.
In most circumstances, it works well as there is little point in insurers charging increased premiums to deal with small losses where it makes more sense to retain the risk yourself.
For example a small scratch on a car door which is £200 to repair.
However, the critical point is understanding precisely what your policy excess is under different circumstances of loss.
This should ensure that you’re not left with an unexpected cash flow problem and a situation where you need to find money that you hadn’t budgeted for.
Voluntary and Compulsory Excesses
A Motor Trade Road Risks policy will generally include a compulsory excess in the region of £250, on top of which additional excesses could apply if:
- The driver is under 25
- The driver is deemed inexperienced (full UK licence held less than 12 or 24 months)
- The driver has an adverse history (claims or motoring convictions)
Insurers will also offer what is known as a “voluntary excess” whereby they will provide a further discount from the annual premium in exchange for you taking more of the risk yourself.
However, many people misinterpret this and forget that any voluntary excess is in ADDITION to the current policy excess.
For example, a car dealer takes a £250 voluntary excess in addition to his standard £250 compulsory excess. His 24-year-old valeter is involved in an accident where he hits a third party in the side while coming out of the car lot.
On checking his policy, he is surprised to learn that an additional £150 excess applies to because of his age, and he had forgotten the standard compulsory excess.
Rather than the £250 the dealer was expecting, he is liable for the first £650 of the loss!
Such excesses will be outlined in your trader's policy and schedule, and this should be one of your key questions when you look to compare motor trade insurance quotes.
Of possibly even greater significance is the use of a co-insurance clause. Under this arrangement, you will be liable for a percentage of the overall loss.
We have typically seen clauses of up to 10% on some road risks policies.
While this will usually only apply to loss or damage to your own vehicles (not injury or damage to third parties), this could still be significant on a higher value vehicle.
Ask your motor trade insurance broker whether any co-insurance clause exists and the full extent of your liability.
Can I claim back the excess if the claim is not my fault?
In theory, you should be able to recover uninsured losses from the third party insurers, but you would still need to pay your excess up-front before seeking a recovery.
- Take some time to study your current trader's policy and speak to your insurance advisor, then make a note or quick spreadsheet of all the possible scenarios which could apply to your business (e.g. if you have young drivers under 25).
- Ideally, you should keep a contingency fund covering the maximum applicable excess in a separate savings account, this will ensure you don’t have any cash flow problems should a claim arise.
- Shop around – a specialist insurance broker will be able to offer a range of policies from different insurers, and you may find another policy is more appropriate to your current needs.
P.S. Don’t forget similar excesses may apply to Public Liability Insurance and premises (garage risks) insurance, and you should include this in the process.
Free Insurance Review
Insync Insurance will provide a free consultation and review of your Motor Trade Insurance and have access to specialist underwriters providing policies from part-time road risks to full vehicle dealerships.
Book a free review via our website at a time that suits YOUR diary or alternatively call 0330 124 0730 for more information, we would love to hear from you!