Liability Insurance: What Do You Need as a Motor Trader?

As a motor trader, you will already be well aware of the need to protect your business against any unexpected events. Motor trade liability insurance is one way to make sure you are covered for all eventualities, whether you operate as a sole trader or have a company with employees.

Not all liability insurance is a legal necessity and may seem a costly expense if you are a new business. However, it also brings peace of mind in knowing you will be protected from the financial impact on your business of accidents or other incidents that may lead to financial loss or harm to members of the general public.

Future clients may also ask for proof that you are covered by liability insurance, particularly if you are working with local or governmental authorities.

Types of Liability Insurance

Even the most carefully run company can have accidents and, without a reasonable level of liability cover, you could find yourself facing costly legal fees with the inevitable financial consequences to your business.

There are generally three main types of liability insurance that can be important as part of your motor trade policy. Which ones you need will depend on the type of motor trade business you run, though you may want to consider all three, particularly if you have employees.

Public liability insurance is probably the most well-known and a priority for most people in the motor trade. Employers’ liability insurance may be a legal necessity if you have employees and covers you in case of injury at work. Professional indemnity insurance will protect you from cases of poor customer advice.

Public Liability Insurance

When you take out public liability insurance as part of your motor trade insurance policy, you will be covered for any legal liability incurred as a result of bodily injury to a third party or damage to their property while they are on your premises or when you are working in their home, office or business property.

A third party is categorised as someone who does not work directly for your business, whether it is a member of the general public, a client or a sub-contractor you may have hired.

If an accident were to happen, public liability insurance will protect you by covering legal defence costs if the third party were to sue. If you are found to be at fault, the policy will cover any compensation for damages and injury up to the limit of indemnity under your policy.

When taking out a motor trade insurance policy with liability cover, your broker may also include product liability. This will cover the cost of any compensation claims following injury or property damage due to a faulty product that you have sold them. This could include the fitting of additional accessories to the vehicles, or the sale or supply of other motor products.

Liability insurance may be important to those who own a motor trade business when:

· You and your employees are in direct contact with members of the public, for example, if you deliver vehicles or work roadside.

· Members of the public regularly visit your business premises or even your home.

· You or your employees visit other people’s premises to carry out your work.

· You use subcontractors as part of your business. Motor trade liability insurance will generally be an additional level of cover to your motor trade or road risks package. When choosing a policy that is right for your business, make sure you are covered for the amount you have at risk.

Tradex public liability policy offers indemnity limits from £2 million up to £10 million depending on the size and the type of company you own.

Professional Indemnity Insurance

Professional indemnity insurance covers any legal costs and expenses that may be incurred if someone makes a claim against you due to professional negligence. Claims can include damages caused by your company’s actions, wrongful advice or neglect to do something.

· Misrepresentation: Claims can be made against your business if you do not deliver the level of service promised to your client when taking on the work. A customer is legally entitled to receive the service they paid for and can seek reimbursement if they feel the work is substandard or even dangerous.

· Inaccurate advice: Sadly, this is something that could happen all too easily, maybe through an inexperienced employee or even a genuine misunderstanding. As an example, if a customer was given wrongful advice regarding repairs which later caused damage to their vehicle or injury to that person, this would be considered negligent.

· Intellectual property claims: This one is probably less likely but you would be covered if you copy another person’s business idea, even if it was just coincidental or even accidental.

Unfortunately, claims can and do arise from anywhere, even though you may be business specialists offering a professional service. When taking out a policy, make sure you have a high enough level of indemnity (the highest amount your insurance company will pay out following a claim), to cover the worst case scenario. Tradex can offer indemnity limits of £250,000 up to £2 million, with higher limits available on referral. A policy can be issued on a standalone basis or as part of a package including road risks or other liability insurances. The levels you require will be determined by the amount of risk involved in your business. This is generally based upon your assessment of the risks of exposure to a claim, together with the likelihood of a claim being made.

Employers’ Liability Insurance

Employers’ liability is a legal requirement, providing protection to all your employees whether full-time, part-time, casual or volunteers. This will protect you or your employees should one of them have an accident at work.

A claim made against your business can be costly and potentially devastating, which is why it is a legal requirement to have at least £5 million worth of cover. If an accident were to occur without sufficient employers’ liability insurance in place, you could be prosecuted and fined.

If you fail to put any employees’ liability insurance in place, you will face a daily fine of £2,500 until this is rectified and the correct certificate displayed. You can also be fined £1,000 daily if you do not display your employers’ liability certificate or refuse to show inspectors when asked.

All types of liability insurance will provide the policyholder with legal and financial protection. The insurance will pay most of the costs related to the claims and provide full support throughout the process to help protect your business from financial loss.

How Much Does Liability Insurance Cost?

All motor trade businesses vary greatly in their exposure to claims and hazards. The cost of both public liability insurance and professional liability insurance depends on the precise nature of your motor trade business, the size of your company, the amount of work carried out annually, the experience of you and your employees, where your business is located, together with any previous claim’s history.

For public liability insurance, a business that has a high volume of daily visitors and contains potentially hazardous equipment around the yard or workshop will be considered a much higher risk than a sole trader working from home or an office-based company.

The premium for professional indemnity insurance will vary depending on the level of cover you believe you will need. This includes the maximum amount you will possibly have to pay out should a customer make a claim including both legal fees and compensation claims.

Employers’ liability insurance is more costly for trade workers due to the higher level of risk. The total premium will vary depending on the specific type of motor trade business and the number of people you employ.

Generally speaking, the more employees you have, the higher the cost of your employers’ liability insurance. However, each additional employee generally costs less to insure

compared to previous employees added to your cover. It also helps if your business is well-established with experienced staff and a good no claims history.

A knowledgeable motor trade insurance broker will be able to discuss the types of indemnity for your business size and type, whether you are looking to take out a standalone liability policy or to combine it with your road risks or motor trade insurance policy.