What is Business Car Insurance and When Do You Need It?

When using your vehicle for business purposes, you can find yourself driving under some of the most stressful road conditions, from rush hour traffic to the delivery of fragile goods.

And yet, if something goes wrong, your personal car insurance policy won’t necessarily pay out. That’s because there are a surprising number of everyday work situations where business car insurance is required.

Find out when you need business car insurance, what it covers, and the various policies available below.

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When do I need business car insurance?

If you are driving on roads in the UK, you need to have car insurance – that is a legal requirement. Whether or not you need specific business car insurance, however, will depend on how you use your vehicle for work.

If you are simply commuting to and from one place of work, then you should be able to use your standard car insurance if you have a social and commuting policy rather than just social, domestic and pleasure coverage. Make sure you check your policy in detail to ensure you are getting the cover you need.

But there are a range of common, work-related activities, some less immediately apparent than others, that also require different forms of business car insurance. This can include:

• driving to work sites or meetings at different locations
• running business-related errands during working hours
• door-to-door selling
• moving stock
• making deliveries or collections
• driving clients or business associates in your vehicle
• allowing colleagues or employees to drive your car

If you do any of these as part of your business operations, then you will need to take out a business car insurance policy.

Meanwhile, if your vehicle is primarily used for business purposes, such as a taxi or lorry, you would instead need commercial vehicle insurance.

» COMPARE: Personal car insurance

What does business car insurance cover?

As with personal car insurance, there are three main types of coverage you can buy:

• Third party only insurance (TPO). This is the legal minimum requirement by UK law, and covers costs associated with injuries and damage (including vehicles and property) caused by your driving. Damage to your own car is not covered, hence the name – it only compensates the third party.
• Third party, fire and theft insurance (TPFT). This includes compensation for a third party in the event of injury or property damage, but also covers your vehicle if it is stolen, damaged or destroyed in a fire.
• Fully comprehensive. This offers full cover, including if your car is stolen, damaged or destroyed in an accident or fire; personal injury in the event of a collision; and damage to or theft of the contents of your vehicle. This on top of the third party compensation included in TPO and TPFT.

» MORE: Types of business insurance

Classes of business car insurance

There are three ‘classes’ of car insurance for business use: Class 1, Class 2, and Class 3. Each serves a different purpose, so it is important to make sure you select the right product.

What does class 1 business car insurance cover?

On top of commuting and day-to-day personal use, Class 1 business car insurance will allow for driving to multiple places of work, including meetings and job sites.

Your spouse may also be included on the policy, but only if their travel is for the business of the named driver, not their own job.

This means that Class 1 business car insurance could be appropriate for most basic business car use. This could be building site managers who drive to multiple locations, home carers and cleaners visiting different households, or people having frequent, pre-arranged meetings with clients and customers off site, such as estate agents.

It is important to note, however, that Class 1 business car insurance does not cover activities such as door-to-door selling or making deliveries.

What does class 2 business car insurance cover?

The one major difference between Class 1 and Class 2 business car insurance is that with the latter, you can have an additional named driver on the policy that isn’t your spouse.

So, for example, if you are a small business and need an employee to run a business errand in your car, or want a co-worker to go to a meeting using your vehicle, you should opt for Class 2 insurance.

As with Class 1 business car insurance, Class 2 business car insurance doesn’t cover door-to-door selling and deliveries.

What does class 3 business car insurance cover?

This offers the most cover, and is therefore the most expensive, of the three business car insurance classes.

Class 3 business car insurance is for people who rack up a significant amount of miles in their car (but without their car being primarily used for business purposes, as in the case of a taxi or lorry driver.) It covers unlimited long distance travel to unplanned locations.

Typically, it is used by door-to-door salespeople making unarranged visits up and down the country while transporting a small amount of products related to their job. This is distinct from making deliveries, which instead requires commercial car or courier insurance.

It also comes with all the coverage included in Class 1 and Class 2 business car insurance.

Other types of business vehicle insurance

Alongside the three main classes of business car insurance are a number of other options for more specific business activities.

Commercial car insurance

You would need commercial vehicle insurance if what you drive is first and foremost used for business purposes. This could be a taxi or cab, minibus, van, or limousine, as well as larger transport types, such as HGVs and agricultural vehicles.

This kind of coverage would be required by taxi drivers, Uber drivers, driving instructors, and chauffeurs of any kind. There are specific commercial insurance policies for each of these professions.

You may want to consider a commercial vehicle insurance broker in order to make sure you are getting the specialist insurance you need.

Delivery and courier insurance

Another form of commercial car insurance is courier insurance, be it for a car, van, moped, or motorcycle.

If you make deliveries, regardless of whether that is food or other goods, you need a policy that includes carriage of goods for hire and reward cover.

Therefore, if you are a Deliveroo or Just Eat driver, or deal with furniture removal, you will need to look into some form of courier or delivery driver insurance.

Business breakdown cover

Not every business car insurance policy will come with business breakdown cover. Therefore, to make sure you can get your vehicle fixed and back on the road as soon as possible if it encounters any issues, you may need to take out a separate breakdown policy.

» MORE: What is business breakdown cover?

Temporary business car insurance

If you only need business car insurance for a short amount of time – for example, driving your own car or someone else’s for a one-off business trip – you can look into temporary business car insurance. This tends to cover periods from as short as one hour up to 30 days.

Company car insurance

If you drive a company car, and the car is owned or leased by your employer, then it is their responsibility to insure the vehicle.

How much is business car insurance?

Given the sheer number of different types and levels of business car insurance, the cost can vary greatly from person to person and business to business.

However, there are consistent factors across most types of business car insurance that will help inform your premium. This includes, but is not limited to:

• how much you use your car
• the industry you work in
• where you are driving to
• if you are carrying any goods or equipment
• the make and model of your car
• where your car is parked overnight
• the class of business insurance you require
• the level of cover you opt for

By shopping around and carefully comparing insurers, you can try to select the right level of cover, at the best price for your business.

How can I reduce the cost of my business car insurance?

Although business car insurance can be expensive, there are some factors you could consider that may make your premium a bit cheaper.

• Make sure you opt for the right level of cover. While you don’t want your car to be underinsured, neither do you want to waste money on overinsuring your vehicle.
• If you are looking to buy a new car that will be used for work, carefully consider the model. For example, engine size and fuel efficiency can affect your premium.
• Park your car in the safest place you can, ideally off-street or in a secure garage.
• Install extra security devices, such as alarms, immobilisers and steering wheel locks.
• Pay your premium up front if you can afford it, rather than paying in monthly instalments. This can bring down the overall cost.
• Opt for black box, or telematics, insurance. This is where your insurer monitors your driving habits, and amends your premium accordingly.

» MORE: Do I need business insurance?

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