Motor Trade Insurance: A Guide for UK Motor Traders

What Is Motor Trade Insurance?

Motor trade insurance is a specialist type of cover designed for businesses and individuals who work with vehicles as part of their trade. Unlike standard motor insurance, which covers a named individual driving a specific vehicle, motor trade insurance can cover multiple vehicles — including customers' vehicles — under a single policy.

The term "motor trade" covers a wide range of activities, from buying and selling vehicles to repairing, servicing, valeting, and recovering them. The insurance requirements vary depending on the specific activities carried out, the number of vehicles handled, and whether the business operates from premises or on a mobile basis.

Who Needs Motor Trade Insurance?

Motor trade insurance is relevant to anyone who handles vehicles belonging to others, or who buys and sells vehicles as a business activity. This includes:

• Car dealers and used vehicle traders
• Vehicle mechanics and MOT centres
• Body shops and paint sprayers
• Vehicle recovery and breakdown operators
• Car valeters and detailers
• Alloy wheel refurbishers
• Vehicle collection and delivery services
• Part-time traders who buy and sell vehicles from home

If you are handling vehicles that belong to other people — whether for repair, storage, or sale — you have a duty of care and a potential legal liability. Motor trade insurance is designed to address these specific risks.

Road Risk Only Policies

A road risk only policy is the most basic form of motor trade insurance. It covers you to drive vehicles that are part of your trade on public roads — for example, driving a customer's car to and from your workshop, or test-driving a vehicle you are selling.

Road risk policies are available at three levels:

• Third party only — the legal minimum, covering damage to other people and their property
• Third party, fire and theft — adds cover for fire damage and theft of the vehicle
• Comprehensive — the highest level, also covering accidental damage to the vehicle you are driving

Road risk only policies are suitable for traders who do not operate from fixed premises — for example, part-time traders who buy and sell vehicles from home, or mobile mechanics who travel to customers. If you have a workshop, showroom, or storage yard, you will likely need a combined policy.

Combined Motor Trade Policies

A combined motor trade policy brings together road risk cover with additional protections for your business premises and operations. This is the most comprehensive form of motor trade insurance and is suitable for businesses that operate from fixed premises.

A combined policy typically includes:

• Road risk cover for driving trade vehicles on public roads
• Premises cover — buildings and contents insurance for your workshop, showroom, or yard
• Stock cover — vehicles held for sale or awaiting collection
• Liability cover — <Link href="/liability/public-liability-insurance" className="text-secondary hover:text-secondary/80 underline underline-offset-2">public liability</Link>, employers' liability, and products liability
• Tools and equipment cover — for specialist tools, diagnostic equipment, and machinery
• Customer vehicle cover — vehicles in your care, custody, or control
• <Link href="/knowledge-centre/business-interruption-guide" className="text-secondary hover:text-secondary/80 underline underline-offset-2">Business interruption</Link> — loss of income if your premises are damaged

The combined policy is designed to provide a single, integrated insurance solution for motor trade businesses. It avoids the gaps and overlaps that can occur when multiple separate policies are used.

Part-Time Motor Traders

Not all motor traders operate on a full-time basis. Many people buy and sell vehicles as a secondary income alongside their main employment. If you regularly buy and sell vehicles for profit, you are operating as a motor trader — even if it is not your primary occupation — and you need appropriate insurance.

Part-time motor trade insurance is available and is typically less expensive than full-time cover, reflecting the lower volume of activity. However, the same legal requirements apply: you must be insured to drive trade vehicles on public roads, and you should have liability cover for any vehicles in your care.

What Affects the Cost?

• The type of motor trade activity (dealing, repairs, recovery, etc.)
• Whether you operate from premises or are mobile-only
• The number and value of vehicles you handle
• Your claims history and driving record
• The number of drivers covered under the policy
• The security of your premises (CCTV, alarms, fencing)
• The types of vehicles you work with (standard cars vs. prestige or modified vehicles)
• Your location — urban areas typically have higher premiums

Common Exclusions

Motor trade policies typically exclude certain activities and vehicle types. Common exclusions include:

• Vehicles over a certain age or value (e.g., classic cars or supercars)
• Vehicles used for racing, rallying, or track days
• Vehicles driven by unlicensed or underage drivers
• Vehicles used for hire and reward (courier/taxi work) unless specifically included
• Damage caused by faulty workmanship (though liability for the resulting damage may be covered)
• Theft where security conditions have not been met

Next Steps

If you work in the motor trade — whether full-time or part-time — having the right insurance is essential to protect your business, your customers' vehicles, and your legal position. The specific cover you need will depend on your activities, your premises, and the types of vehicles you handle.

Focus Insurance Services can help motor trade businesses find appropriate cover tailored to their specific operations. Contact our team for a no-obligation discussion about your motor trade insurance requirements.