Guide to Van and Business Vehicle Insurance
If your business needs to use a vehicle in any way, it’s vital to make sure it is correctly insured.
Most commonly the owners of new businesses use their own car to get out and about, and claim back mileage in the form of expenses. If you do this you need to ensure that your personal policy allows for business mileage. Don’t be tempted to skip this to save a few quid; if you have an accident in working hours your insurance company will want to know where you were going and what you were doing.
If your business needs its own vehicle, whether that’s a leased company car for you or a sales person, or perhaps a van for deliveries, the business will need to get commercial motor insurance.
Just like private motor insurance, basic business vehicle insurance is compulsory. Any vehicle operated by your business must have at least third party insurance – and depending on your business, higher levels of cover are recommended.
Here are the other options available to you:
Fire and theft: This is typically bundled with third party insurance but can be stripped out. It means if you lose your vehicle through no fault of your own in a fire or someone nicks it, you will get its market value back. Even if you’re only running a knackered old van for local deliveries, it’s worth paying the few extra pounds for this pretty basic cover. It’s sods law that your under-insured van would be stolen when you can least afford it.
Goods in transit: Absolutely essential if your business vehicle is carrying thousands of pounds of stock around. Think through what would happen if a van load of stock was stolen en-route or destroyed in an accident. How would it affect your business’s cash flow to shell out again for the stock or materials? A single theft could put your business under. Goods in transit insurance will cover the value of goods on board.
Replacement vehicle: If you rely on your vehicle to keep the business going, consider buying this insurance. You will get another vehicle while yours is being repaired or replaced. And since that could be weeks, it could save you a small fortune in rental costs.
Legal expenses: Another relatively cheap add-on. For a little extra cash your business will be represented in the event of most legal action involving a business vehicle. It’s estimated that one in three accidents involves a company vehicle or someone driving on business. So think of legal expenses insurance as peace of mind in case your business is dragged into a nasty prosecution.
Breakdown: Pretty obvious why you’d need this, especially if you have a van. It could cost you more than an annual breakdown policy just to get a tow off a motorway. Some insurance companies bundle it with motor insurance, making it a little cheaper.
There are several details to check before signing any commercial vehicle insurance policy:
Coverage of policy: Your policy will be dictated by the kind of work your business does. A builder carrying essential tools would only need coverage for “carriage of own goods”, while a printer with a van load of clients’ work would need “carriage of goods for hire & reward”.
Excess: You’ll be expected to pay the first part of a claim, from as little as £50 up to £500. The bigger the excess the smaller your policy will cost, but the less money you’ll get if something happens. And remember that employees might not treat a company vehicle with the same respect they’d show their own car! Sometimes big companies with lots of vehicles accept a ridiculously high excess to keep the insurance bill down. They figure it’s cheaper for them to do repairs under £2,000 themselves. This is a risky strategy for a small business without big cash reserves.
No claims discount: You can build one of these up just like with your personal car policy. You can also protect it once built up – highly advisable. Once your business is running a couple of vehicles, the chances of insurance claims shoot up.
Limit of indemnity: This is a ceiling on how much the insurer will pay out for each incident, and is usually set at £5 million. As a responsible business owner, you should pay a little extra to increase this to £10 million if you can. If your vehicle was involved in an accident with multiple people, the extra payout might be needed.
Additional drivers: If your business needs the flexibility of adding drivers regularly, check this will be easy without incurring charges. Some policies cover all employees automatically, although you may still need to send their details off. Remember you need to keep a copy of the driving licence of each employee who uses a business vehicle.
Driving outside the UK: Check the rules before you make the trip. With some policies you have to notify the insurer before the vehicle leaves the country.
- You can get an instant online insurance quote right now via our partners, Simply Business, or Direct Line.
Posted June 10, 2008
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