Car Transport Insurance
Although we regularly check that each of our partners carries adequate insurance cover for your vehicle, we recommend you check the operator's insurance policy before handing over your vehicle for transportation.
The information below provides an outline of the various insurance types and associated terminology.
Insurance needs for car transporter companies
Traditionally, motor trade insurances for car transporter companies are split between: Road Risks which includes the minimum cover which satisfies the requirement for compulsory motor insurance cover and Garage or Premises Risk, which is a combination of property, liability and financial loss covers.
Where Road Risks only cover is required, the insurers will issue a policy and certificate of insurance. There is a relatively small market for the type of motor trader who only requires Road Risks cover. These are generally small businesses, in many cases, operating from home. Where the policyholder requires Garage or Premises Risks to be covered, there are several methods that can be used: an "Internal Risks" policy which complements the Road Risks cover by providing Public Liability cover and Damage Cover to Vehicles when they are on the premises and not in RTA situations a Comprehensive Road and Garage Policy which brings both Road Risks and Internal Risks into one policy, usually providing extra covers, not available where Road Risks and Internal Risks are insured separately a Combined Policy, similar to those issued to non-motor risks with sections covering: Road Risks Property-Including Vehicles on the Business Premises.
Liability Business Interruption Glass Money and other covers. The majority of insurers offering garage risks cover will normally use the last of those listed above. The first two are relics from the days when property insurance was governed by tariffs which dictated what could and could not be insured under certain policies. On a note of caution, even although only a small number of insurers issue motor trade policies, there are many variations in cover between these companies and even within the same company, there may be different motor trade products aimed at certain sectors of the market.
Motor Covers - Road Risks
Under the Road Risks only policy, a typical definition of "vehicle" could be:
"Any motor vehicle, including any vehicle (mechanically propelled or otherwise) attached to the vehicle, which belongs to the policyholder or is in his custody or control for motor trade purposes and which is not:
- a steam driven vehicle
- a goods carrying vehicle used for hire or reward
- a vehicle transporter capable of carrying more than two vehicles.
Clearly, this definition covers a very wide range of vehicles. It is important to note, however, that the vehicles must be in the trader's hands in connection with the business. There would be no cover if the trader borrowed a friend's car to go to a football match.
Cover is restricted to use on a "road" and this is usually set out in the policy in the following manner:
"Cover only operates while the vehicle is (within the policy territorial limits):
on any road in the course of a journey
- on any air, sea or rail craft
- temporarily garaged during the course of a journey in or on premises not owned or occupied by the policyholder."
Insurers may agree to cover any vehicle "whilst garaged at the private domestic garage or parked at the home of any permitted driver, provided that this home is not trade premises."
In addition to covering the vehicle in UK, the policy will also comply with EU legislation and provide cover in most of Europe for the minimum cover.
A number of insurers will include a period of "free" foreign use under which the vehicle is covered abroad for the full policy cover. The practice and cover varies among insurers and it is necessary the check the wording before advising the client.
So cover is more restricted than say, a private car policy and there is no cover for cars parked on the forecourt or in the premises themselves. To cover these risks, the trader needs Garage or Premises Risks cover.
Some traders try to get round this problem by parking their vehicles on the road near their premises, but at least one road risks insurer combats this by excluding damage cover for any vehicles within 1km of the business premises.
This type of exclusion can cause problems if it is interpreted too literally. For example, if a driver is returning from a long journey, but has an accident as they are approaching the premises, there would be no damage cover! The same problem would exist when a driver was commencing any journey.
With regard to third party claims, the Road Risks policy would cover accidents occurring on or about the premises where the accident was considered to have happened "on a road or other public place", for example, a customer injured by a car on the forecourt.
If, however, the injury occurred on a part of the premises not covered by RTA legislation, the road risks policy would not apply.
The Road Risks policy tends to follow the commercial vehicle policy as regards limits of indemnity:
- third party bodily injury - as required by RTA 1988, this is unlimited
- third party property damage - the current legal minimum is £1 million, but this is regarded as too low for commercial risks and most brokers will arrange limits of £2 million or £5 million (the standard limit on private car policies is £20 million)
- damage to vehicles - insurers will protect themselves against high exposures by inserting fairly conservative limits in respect of any one vehicle; usually there are separate limits for comprehensive and for third party fire and theft policies.
There are generally facilities for the trader to negotiate higher limits.
The policy is normally worded to the effect that, in the event of a total loss, insurers will pay the limit or the market value, whichever is the lower.
When settling total losses on vehicles owned by the trader, the insurer may stipulate that it is the trade market value figure that will be used. This can be considerably lower than the "book" value used in normal total loss settlements.
It assumes that the trader has access to this market which is not always the case. It is important, therefore that this aspect of the cover is checked carefully.
Under this type of policy, only vehicles carrying one of a number of specified trade plates are insured. On occasions, specified vehicles belonging to (or hired or leased to) the policyholder may also be added.
The use of trade plates is governed by regulations set down by the licensing authority for each particular trade plate and use must be only in connection with the motor trade. Social, domestic and pleasure use is not allowed by trade plate regulations and consequently, trade plate policies do not provide this cover.
General Commercial Insurances For Car Transporter Companies
1. Employers' Liability
The Employers Liability (Compulsory Insurance) Act 1969 requires all employers; unless they are exempt, to have at least £5million of Employers Liability Insurance with an approved Insurer to protect their business from claims from employees for accidents or sickness caused through work. In practice most insurers give £10million
2. Public Liability
Whilst Public Liability Insurance is not a statutory requirement, it is strongly recommend you maintain an appropriate policy to cover you for you legal liability for accidents to persons you may interact with at the client's workplace or members of the public as a result of your business activities. It also covers for damage to property and Legal Costs of defending yourself against a claim from a third party. It is voluntary for most businesses but could save you a lot of money in the long term.
Loss of or damage to:
- Machinery, Fixtures and Fittings
- Tools and Equipment, including Employees' Tools, both on the premises or away on sites
- Stock of Vehicles - on the premises, forecourt or stored off the premises - the sum insured will represent the maximum value at risk, but there may also be a maximum limit on any one vehicle
4. Business Interruption
To cover loss of income resulting from damage insured under the property section. As well as ensuring that the indemnity period was long enough, the motor trader has to consider the following extensions:
- Denial of Access
- Suppliers' and Customers' extensions
- Interruption due to failure of Gas, Electricity or Water Supplies
- Loss of Book Debts.
In some cases, the trader may argue that all they need to continue in business is a plot of land and that full business interruption is not necessary. By doing this they are underestimating the effects that say, a serious fire, could have on their business and their customers.
5. Glass Breakage
6. Goods In Transit
Vehicles carried on transporters are usually insured separately. However there are a number of companies who now include this within the Road Risks.
Although most transactions are done by cheques and transfers, there is still a fair amount of cash involved with the motor trade. Normally, the cover would include:
- "assault" personal accident benefits
- cash in safe
- cash on premises
- cash in transit.
8. Fidelity Guarantee
This is cover against loss by dishonesty of employees.
9. Uninsured Loss Recovery / Legal Expenses
The motor trader is exposed in the same way as other firms to litigation or to the cost of recovering uninsured losses. This cover is usually offered as a "bolt on" and is provided by a specialist insurer.
10. Loss of Use - Customers' Vehicles
If the customer's vehicle is damaged when it is in the hands of the policyholder and there is a delay in returning it, the policy will pay any reasonable hire charges the customer may incur. Usually, claims under this section are avoided by the trader providing a courtesy car.