Everything you need to know about motor trade liability insurance
To protect your business against financial losses, you must assess the risks you face and purchase liability insurance accordingly. Securing the right level of coverage at the right price can be a challenging task, but it is essential if you wish to safeguard your profits and ensure the long-term success of your business.
What is motor trade liability insurance?
Motor trade liability insurance protects you against claims arising from employees and customers. There are three main types of liability policies:
1) Employer’s liability insurance, which covers you against the cost of bodily injuries and financial losses sustained by your employees
2) Public liability insurance, which protects you against the cost of bodily injuries and/or financial losses sustained by members of the public
3) Sales and service liability insurance, which covers you against the cost of bodily injuries and/or financial losses arising from the following:
• The sale or supply of motor vehicles and other related products
• The testing, servicing, repair, maintenance, modification, cleaning or inspection of motor vehicles
Do I require all three types of liability insurance?
If you have employees, you must take out employer’s liability insurance in order to operate legally. The law does not require you to take out public liability insurance or sales and service liability insurance. However, you should strongly consider taking out these policies for added peace of mind.
What level of coverage do I require?
The law requires you to purchase at least £5,000,000 of employer’s liability insurance cover. However, as a serious accident could result in a major claim for compensation, you may wish to take out a higher level of coverage. If an accident occurs and you lack adequate liability insurance cover, you may face prosecution and fines, which could be detrimental to your business’ finances.
How will an insurance company calculate the cost of my liability insurance premiums?
The cost of your liability insurance – known as a premium – will depend on a range of factors, including your hours of operation, your insurance claim record, your annual turnover, the type of vehicles you work with and the number of people you employ.
Your insurance company may use a book rate, or average rate, to calculate the cost of your premiums. This means that it will base the cost of your policy on the claims it has paid out to similar motor traders.
How can I reduce the cost of my liability insurance?
When you take out liability insurance, your insurance company will expect you to agree to an excess – a fixed contribution that you, as the policy holder, must pay out in the event of a claim. If you wish to reduce the cost of your insurance, you can pay a voluntary excess – a fixed contribution that you must pay out in addition to the compulsory excess in the event of a claim. In general, the higher your voluntary excess, the lower the price you will pay for your liability insurance.
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