When running a motor business, it’s often difficult to know which level of insurance you need. At ChoiceQuote, we’ve been helping motor traders navigate the confusing world of insurance for more than 20 years
As a business owner, you’ve probably heard the term “liability insurance”. You may be aware that it protects your business against claims and legal fees. In this article, we’ll cover what liability insurance means for motor traders, including public liability, employers’ liability, products liability, and sales and service indemnity insurance. It’s all about helping you to know what kind of insurance protection your business needs.
What is motor trade liability insurance?
Liability insurance for motor traders protects your business against the financial costs of defending legal action arising from claims made against you or your business. It also protects you against the costs of defending successful claims.
The type of liability insurance you need depends on the claims you need to protect your business against.
In the motor trade, you will often find that covers are packaged together. So, if you take out public liability insurance, employers’ liability insurance is often included as part of the package.
In case you’re not sure which liability insurance you need, we’ll take a look at each of the following level of cover, and explain what it includes:
- Public liability
- Employers’ liability
- Professional indemnity
- Product liability
- Directors’ and Officers’ insurance
Public liability insurance
What is it?
Public liability insurance covers the cost of compensation claims and legal expenses you are required to pay if a customer or a member of the public is harmed from your business activities and takes your business to court.
Who needs it?
This cover is recommended for businesses that interact with the public, or have visitors on their business premises, so that there is a risk of injury that might lead to a claim. At ChoiceQuote, we recommend all motor traders to consider public liability cover.
What it covers:
- Legal liability for injury to third parties or damage to their property in relation to your work
- Up to £10m of cover for any single claim (different limits are available, though we recommend at least £5m of cover)
- Legal defence costs covered
- Compensation for injury or death claims covered
Because of the similarity in cover, motor trade public liability insurance is often sold together with employers’ liability insurance. They are available separately if required, though.
Employers’ liability insurance
What is it?
Similar to public liability, employers’ liability cover pays towards compensations claims from your employees, if they are injured or ill due to their work.
Who needs it?
If you employ staff in your motor trade business, even on a part-time or temporary basis, employers’ liability insurance is a legal requirement. You can be fined up to £2,500 a day if you are not correctly insured, and £1,000 if you fail to display your certificate or make it available to inspectors.
What it covers:
- Legal liability for injury to employees or damage to their property in connection with their work
- Up to £10m of cover for any one claim (different limits are available, including higher levels of cover if needed. The legal minimum requirement is at least £5m of cover)
- Legal defence costs covered
- Compensation for injury or death claims covered
Employers’ liability cover can be purchased separately, packaged with public liability insurance, or included as part of a full package of motor trade liability insurance products.
Professional indemnity
What is it?
Professional indemnity insurance covers claims for damages in relation to disputed professional advice given.
A customer could make a claim if they follow advice you have given and suffer financial loss as a result. This could include negligent advice on an MOT, warranty cover, finance or GAP policies sold.
Who needs it?
If a business provides an expert service, advice or consultancy, this level of cover is generally recommended.
What it covers:
- Payment for justified claims of professional negligence in relation to advice given
- Costs of legal defence
- Payment on a ‘claims made’ basis
Product liability insurance
What is it?
Product liability insurance provides cover against compensation claims for injuries caused by a faulty product. If a part fitted to a vehicle should fail – because of a fault or incorrect fitment, for example – and leads to third-party injury or damage to property, then product liability insurance can cover losses.
Product liability cover is sometimes known as sales and service indemnity cover, or defective workmanship cover.
Who needs it?
Any business that supplies parts to the motor trade (motor factors), or repairs or reconditions a vehicle part, should consider this cover.
What it covers:
- Payment for proven claims of professional negligence in relation to the supply or fitting of vehicle parts
- Costs of legal defence
- Limits of indemnity are in line with public liability insurance
Product liability insurance for motor traders is often packaged alongside public liability insurance.
Directors’ and officers’ insurance
What is it?
Directors’ and Officers’ insurance provides protection against any claims made against individual company directors, officers and partners. Business owners may have claims made against them as individuals as well as against their business. Directors’ and Officers’ insurance (D&O cover) protects you against this.
Who needs it?
Any business with directors, officers or partners.
What it covers:
- Payment for damages relating to proven claims of injury or damage to third-party property as a result of your actions as a business owner or senior manager
- Costs of legal defence of claims made against you personally
FAQs
Do I need to have liability insurance?
You are legally required to have employers’ liability insurance if you have employees. Other covers are optional but do come highly recommended. Imagine the expense of defending claims or paying out in the event of proven claims – it could finish your business if you don’t have the right cover in place.
How much does liability insurance cost?
A basic employers’ liability and public liability policy starts from as little as £150 + insurance premium tax per year. Speak to us about your needs and we will make sure you have the right level of liability cover for your motor trade business.
What liability insurance do sole traders need?
You will need employers’ liability insurance if you indirectly employ other people (such as subcontractors) to carry out your work. Otherwise, you won’t need employers’ liability cover, but should speak to us about cover for any other liabilities you face.