Motor trade insurance

A straightforward guide for UK motor traders

Motor trade insurance is designed for businesses that sell, repair, service, move, or valet vehicles. It brings together road risk cover and business protections in one policy, helping you legally drive customer vehicles and safeguard your workshop, stock, tools, and liability exposures. If you handle vehicles that are not registered to you or your business, a standard private car policy will not protect you - this is where motor trade insurance is essential.

In the UK, market conditions have shifted. After two years of losses, motor insurers are expected to be profitable again in 2024, helped by stabilising inflation, fewer claims, and premium increases late in 2023. Average motor premiums fell to about £562 by Q2 2025 and saw a modest 2.9% decline among top quotes in Q3 2025. Even so, claims costs remain elevated - theft claims average around £11,800 - and repair bills have risen sharply since 2020, driven by parts, labour, and advanced vehicle technology. Fleet premiums spiked by roughly 25% in 2023, and motor trade premiums have risen by 10-15% in 2025 with further pressure likely into 2026.

Insurance can offer real financial protection, but only when you understand what is covered - and where the gaps are.

This guide sets clear expectations. Motor trade insurance can protect you from the cost of damage, theft, and third-party liability linked to vehicles in your care. It will not remove all risk, and cover limits, exclusions, and excesses matter. We will walk through the essentials in plain English so you can compare options safely and choose cover that fits the way you trade.

What is covered in practice and how claims typically work

Road risks cover is the backbone. It allows you or named employees to drive customer vehicles and your own trade vehicles for motor trade purposes. You choose the level - third party only, third party fire and theft, or comprehensive. This protects against liability to others, and at comprehensive level can cover accidental damage to vehicles you are driving. If you collect or deliver cars, demonstrate vehicles, or test drive after repairs, this cover is critical.

Most motor traders add combined cover to protect the premises and assets. This can include stock of vehicles, tools and equipment, customer vehicles under your custody, business interruption following an insured incident, and public and employers’ liability. For example, if a fire damages your workshop and several customer cars, combined cover can respond to building contents, vehicle stock, and liability exposures, subject to the sums insured and policy terms.

Claims are usually reported to the insurer as soon as possible with full details, photos, and supporting documents. For vehicle damage, an approved repairer may be appointed, or you might use your own bodyshop with agreed labour rates. Theft claims will require proof of forcible entry or other evidence. Where liability is disputed, insurers manage investigations and negotiate with third parties. Exclusions vary, but common ones include unroadworthy vehicles being driven on public roads, deliberate acts, undeclared drivers, using vehicles for hire and reward, and inadequate security where specific conditions apply. In short, know your policy conditions - keeping accurate records of drivers, vehicle movements, and security measures will help prevent disputes and delays.

Who genuinely benefits from this cover

Motor trade insurance suits anyone whose business regularly handles vehicles they do not own. That includes independent mechanics, MOT stations, bodyshops, valeters, detailers, car sales - both forecourt and home-based traders - vehicle delivery agents, and mobile technicians. Fleets attached to trade activity, such as courtesy cars or demonstrators, also fit under this umbrella.

It can be less suitable for hobbyists who rarely handle third-party vehicles or individuals selling the odd car without a trading intention. If you only need to drive your own personal car, a private motor policy is likely more appropriate. For gig-economy use such as food delivery, a dedicated hire and reward policy is required. The right approach is to match cover to your genuine trading activity and avoid paying for protections you will not use.

Choosing your level of protection

1. Basic - Road Risks Only

   • Third party only, third party fire and theft, or comprehensive for driving vehicles in connection with motor trade business.
   • Suitable for start-ups, mobile mechanics, or home traders who do not keep stock or operate a premises.
   • Typically excludes premises, tools, and customer vehicles kept overnight unless specifically added.

2. Standard - Road Risks Plus Selected Add-ons

   • Road risks plus protections like tools cover, customer vehicles on premises, and public liability.
   • Fits small to medium traders with limited stock and a modest workshop or unit.
   • Consider adding business interruption to cover lost income after a covered incident.

3. Comprehensive Combined - Full Trade Combined Policy

   • Combines road risks with premises, vehicle stock, customer vehicles, tools and plant, money, goods in transit, public and product liability, and employers’ liability.
   • Designed for established garages, bodyshops, and forecourts with higher sums insured and staff.
   • Often includes risk management conditions - alarms, CCTV, approved locks, and overnight security.

4. Optional Add-ons

   • Demonstration cover with accompanied or unaccompanied test drives.
   • Courtesy and demonstrator vehicles, including GAP or hire replacement extensions.
   • Windscreen, key cover, breakdown and recovery, misfuelling, and legal expenses.
   • Engineering inspection for lifts and compressors, and cyber cover for digital risks.

Costs and what shapes your premium

Note: Prices vary widely. In early 2025, overall UK insurance rates fell in many lines, but motor remained a pressure point. Fleet premiums rose sharply in 2023 and continued to firm into 2025, though at a slower pace.

Who can apply and common requirements

Most UK-based motor traders can apply if they are actively trading - as a sole trader, partnership, or limited company. Insurers typically ask for proof of trading such as invoices, a trader’s website or listings, premises lease, or HMRC registration. You will need details of drivers, vehicle types handled, security arrangements, past claims, estimated turnover, and sums insured for stock and equipment. Employers’ liability is usually required if you have staff.

Applications can be declined for undisclosed convictions, frequent large claims, high-value performance stock without adequate security, or if trading activity is inconsistent with the cover requested. Insurers may also set conditions such as approved alarms, trackers for high-value vehicles, secure keys management, and restrictions on unaccompanied demonstrations. If you are new to trading, transparency over your experience and realistic sums insured helps underwriters price fairly and avoid disputes later.

From quote to claim - the simple path

1. Gather trading proof, driver details, turnover, and sums insured estimates.
2. Request quotes for road risks and combined cover as needed.
3. Compare excesses, security conditions, and vehicle value limits carefully.
4. Choose cover levels and add-ons that match real daily activities.
5. Set up security measures - alarms, CCTV, key control, and trackers.
6. Buy the policy, check documents, and correct any inaccuracies immediately.
7. Keep records of vehicle movements, drivers, and jobs for compliance.
8. If a claim occurs, report quickly with photos, invoices, and witness details.

The upsides and the trade-offs

Key checks before you commit

Before buying, review your excesses for own-damage, theft, windscreen, and liability sections. Confirm the maximum value for any single vehicle and total overnight limits. Check exclusions for unaccompanied demonstrations, use outside motor trade purposes, driving unroadworthy vehicles on public roads, and any restrictions on drivers under a certain age. Understand security warranties - alarms, CCTV, secure key cabinets, and tracker requirements for higher-value stock. Review renewal pricing and mid-term adjustment processes, as rates can change if claims occur. Finally, make sure documents list all business activities you perform - from servicing and repairs to vehicle sales and collection - so there are no gaps at claim time.

Alternatives and related protections

1. Commercial motor fleet insurance - best if you operate a set fleet of vehicles rather than handling customer cars.
2. Public liability insurance - suitable for low-risk traders who do not drive customer vehicles and need third-party injury or property cover.
3. Employers’ liability insurance - legally required if you have employees, apprentices, or some labour-only contractors.
4. Tools and equipment insurance - for mobile mechanics needing cover away from premises without full combined trade cover.
5. Business interruption insurance - to protect income after insured damage if full combined cover is not required.

Common questions answered

Q: Do I need motor trade insurance to drive customer vehicles? A: Yes, if you drive, move, or road test vehicles that are not registered to you, a road risks trade policy is usually required. A private policy will not cover business use of customer cars.

Q: Why are premiums rising for motor traders? A: Claims inflation from rising parts, labour, and technology costs has pushed up claim values. Although average private motor premiums dipped in 2025, motor trade and fleet rates remain under pressure.

Q: Can I add temporary drivers for busy periods? A: Many policies allow named drivers to be added, sometimes at short notice. The insurer will assess age, driving history, and role. Additional premiums and restrictions can apply.

Q: Are unaccompanied test drives covered? A: Not by default. You typically need a specific demonstration extension. Some insurers require accompanied drives or impose age and licence restrictions to manage risk.

Q: What security is required for high-value stock? A: Expect alarms, CCTV, secure key cabinets, and trackers for performance or high-value vehicles. Non-compliance with security conditions can limit or void theft cover.

Q: How are claims handled for workshop damage? A: Report immediately with photos and inventory. Insurers may appoint loss adjusters and approved repairers. Business interruption can help cover lost income if included and triggered by an insured event.

Q: Will premiums fall in the near term? A: The market turned profitable in 2024 and some private motor premiums eased in 2025. However, motor trade rates rose 10-15% in 2025 and may stay elevated while claims costs remain high.

What to do next

Take stock of your trading activities, vehicle values, drivers, and security measures. Compare road risks and combined options side by side, paying close attention to limits, exclusions, and excesses. When you are ready, request multiple quotes and ask insurers to confirm how conditions apply to your specific setup. You remain in control - choose the cover that clearly matches the way you work.

Important note

This guide provides general information only - it is not personal financial advice. Policy terms vary by insurer. Always read the schedule, endorsements, and wording carefully, and confirm details with the insurer or broker before you buy.