Starting out in the motor trade can be exciting, but also confusing, especially when it comes to insurance. From understanding legal obligations to selecting the right type of policy, getting it wrong can result in unnecessary costs or even serious legal consequences.
In this guide, we break down exactly when motor trade insurance is required, who needs it, and how to choose the right policy, whether you're a full-time dealer, a part-time mobile valet, or restoring classic cars from your home garage.
Is Motor Trade Insurance a Legal Requirement?
Yes. Motor trade insurance is a legal requirement if you're operating a business that involves buying, selling, repairing, moving, or otherwise working with motor vehicles This includes:
Relying on private car insurance is not only insufficient, it’s illegal. If you're using a vehicle for business without the proper cover, you risk prosecution, heavy fines, invalid insurance, and even vehicle seizure.
What About Part-Time Traders? Is It Different from Full-Time Motor Traders Insurance-Wise?
Whether you trade full-time or part-time affects your insurance requirements. Even if you only buy and sell cars in your spare time, you still need motor trade insurance.
While part-time traders may only need basic road risk insurance, especially if they operate from home, full-time traders, or those with business premises, should consider combined cover to protect all aspects of their operations.
What Happens If I Don’t Have Motor Trade Insurance?
Operating in the motor trade without the correct insurance can have serious consequences:
- Fines and points on your licence
- Prosecution and criminal charges
- Invalidated insurance claims
- Vehicle seizure or business closure
Private Car Insurance vs Motor Trade Insurance
While it may seem easier or cheaper to stick with your existing private car insurance but doing so is a major risk. Private policies are only valid for social, domestic, pleasure, and commuting use and therefore won’t protect you or your business if:
- You're driving or moving customer vehicles
- You're transporting parts or tools for work
- A vehicle is damaged, stolen, or causes damage while in your care for business purposes
For instance, if you're a mobile car valeter and your vehicle is broken into on a job, a private policy won't cover the theft of tools or damage to your car. A motor trade policy on the other hand can have tools or damage protection added to your policy if this is needed in line with your business. Likewise, if you damage a customer’s vehicle while driving it, private insurance won’t protect you.
Finding the right motor trade insurance for your business can be straight forward if you have a good broker who can walk you through the coverage you definitely need.
Additional Benefits and Cover
Other areas where auto or motor trade insurance differs from standard private car insurance are primarily focused on liability and tend to be more business-specific.
- Liability cover can include public liability, product liability, sales and services liability and employers’ liability (which is a legal requirement if you employ someone). Public liability isn’t legally necessary, but it will protect you if a member of the public were to injure themselves whilst on your property.
- Cover against the loss or theft of your equipment. You can also purchase buildings and contents insurance, as well as business interruption cover which may cover the loss of revenue should your business be unable to operate following a disaster
What Are the Different Types of Motor Trade Insurance?
There are two main types of motor trade insurance: Road Risk and Combined. Understanding the difference is key to selecting the right policy for your business:
Road Risk Insurance
Road Risk cover is the most basic level of motor trade insurance, suitable for sole traders or smaller operations. It allows you to drive vehicles in connection with your business including customers’ vehicles legally on public roads. Coverage options include:
- Third Party Only: Covering damage or injury to others
- Third Party, Fire & Theft: Added protection for fire damage or theft of vehicles
- Fully Comprehensive: Including damage to vehicles you're driving or repairing
Ideal for:
- Mobile mechanics
- Home-based or part-time traders
- Valeters and detailers
- Buyers and sellers who operate from home
Combined Motor Trade Policy
A Combined policy offers wider protection and is recommended for full-time businesses operating from dedicated premises. It can include:
- Road risk cover
- Public, product, and employer’s liability
- Tools, equipment, and contents cover
- Business interruption insurance
- Premises and stock protection
- Trade plate insurance (if you use unregistered vehicles)
Ideal for:
- Vehicle dealerships
- Repair garages and MOT stations
- Car restoration businesses
- Recovery operators
Ready to Get Covered?
Motor trade insurance isn’t just a legal requirement, it’s essential protection for your vehicles, your business, and your peace of mind. Whether you’re trading part-time from home, running a busy garage, or restoring classics on the side, choosing the right policy can save you from costly mistakes. At Tradex Insurance Services, we specialise in helping customers find tailored motor trade insurance to suit every kind of trader.
Contact us today to explore your options and discover the ideal coverage for your business.