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How to get a good deal on commercial car insurance

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If you use a vehicle to operate your business, you want to make sure your car, van, truck or lorry – or your fleet of vehicles – is covered by the most appropriate commercial insurance policy. Making the wrong choice could disrupt your business’s operations, leaving you out of pocket and at risk of liability.

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How does commercial car insurance work?

If you use vehicles to run your business, then you’ll need a commercial car insurance policy. Commercial car or vehicle insurance is used to cover taxis, minibuses, HGVs, driving instructors, delivery vans and business fleets with two or more vehicles.

Commercial vehicle insurance is a legal requirement in the UK, which protects you if you use your car or van for work-related purposes. It covers a much wider range of uses than a standard vehicle insurance policy.

In the event of an accident or incident, as well as protecting third parties, commercial vehicle insurance policies are designed to protect you and your business assets to ensure your business can continue operating.

What’s the difference between business and commercial car insurance

Commercial car insurance covers people who use their car as an integral part of their job – such as delivery drivers, taxi drivers or driving instructors.

If you use your car while working, then you’ll need business car insurance.

Standard car insurance policies only cover your daily commute. If you use your car for anything other than driving to a single place of work, then you’ll need business car insurance. If you’re involved in an accident while using your car for work and you don’t have business car insurance, you’ll be unable to make a claim – and you may be committing an offence.

Business use car insurance comes in several different classes, depending on what level of cover you need:

  • Business car insurance class 1: Covers your car if you use it to drive between multiple work locations or to visit clients or customers
  • Business car insurance class 2: This also allows you to add a named driver – a co-worker who will also be insured to drive the same car
  • Business car insurance class 3: Covers long-distance driving as part of your business use. However, if you use your car to deliver merchandise, you’ll need commercial car insurance

What types of commercial vehicle insurance are there?

Commercial vehicle insurance includes:

  • Fleet Insurance
  • Commercial minibus insurance
  • Taxi Insurance
  • Truck insurance
  • Haulage insurance

As with regular car insurance, you can choose from three cover levels: third party only, third party, fire and theft or comprehensive.

There are generally other options available such as named driver policies and any driver policies suitable for firms with multiple vehicles and lots of drivers, such as taxi firms, hauliers or delivery companies.

How much, on average, does commercial car insurance cost?

The more comprehensive the cover you choose, the more it’s likely to cost. And, if you use your car for work, it could be expensive. This is because insurers assume you’re on the road more, possibly in heavy traffic, driving in unfamiliar places, which could mean you’re more likely to have an accident. Because commercial policies can cover a wide variety of risks, it’s difficult to give an average cost.

In some cases, tailored business car insurance can actually be cheaper than standard car insurance. According to gocompare.com, on average, fully comprehensive business car insurance costs around £92 less than standard fully comprehensive insurance – £431.35 a year compared with £544.02.

When it comes to calculating the cost, factors such as the vehicle you drive, your driving history and how many miles you clock up all contribute to the cost of your insurance more than whether you drive your car for work or not. 

How can I get the best deal on my commercial vehicle insurance?

As with regular car insurance, there are things you can do to help you get the best deal for commercial car insurance, such as:

  • Don’t over-insure yourself – If you over-estimate how many miles you do for business you’ll end up paying for insurance you don’t need
  • Pay annually – You’re likely to get a better deal than paying monthly
  • Increase voluntary excess – This will lower your premium
  • Build up a no claims bonus – Unsurprisingly, insurers give better prices to motorists who are claim-free
  • Take care with add-ons – Don’t pay for extras you don’t need or want – and check if you’re already covered elsewhere. For example, if you have a company car, the firm you work for has a legal responsibility to ensure that its vehicles are fully insured for business usage
  • Have relevant policies in place – Risk assessment and risk management of drivers may help you cut the cost of cover
  • Employ experienced drivers with clean records – Many insurers exclude drivers under 25 or charge an additional premium for them
  • Pay attention to vehicle security – This could include making sure safe, overnight parking arrangements are in place
  • Install dashboard cameras – Some insurers offer discounts for this
  • Shop around – By taking the time to look at all the options available, you’ll be able to find the best deal

If you run a business with more than one vehicle, fulfilling your legal requirement to keep them all insured is where things get more complicated, especially if you employ multiple drivers who are likely to drive different vehicles at different times. Things to consider include:

  • If you have a large pool of drivers who drive all of your vehicles, you could benefit from an ‘any driver’ policy. This is ideal for businesses with multiple vehicles and many drivers, such as taxi firms, hauliers or delivery companies. However, this is likely to be more expensive as any driver within your business who holds a valid licence is covered, which increases the risk for the insurers.
  • Insuring all your vehicles and drivers under one fleet insurance policy may be the most convenient option, especially if you find a deal offering one renewal date with just one premium to pay. In some cases, a fleet policy may be the cheapest option, although you may be able to source cheaper cover on an individual basis.
  • Typically, the more convenience offered by a fleet policy, the more expensive it’s likely to be, particularly if you choose the ‘any vehicle’ and/or ‘any driver’ options. However, depending on the size and complexity of your business, it could be worth the additional cost to save on admin and to have the peace of mind that you’ll have appropriate cover in place to meet most eventualities.

Finding the right policy for a business vehicle is not always straightforward, and it’s essential to make sure your policy is the exact fit for your business activities. With so many factors to consider it’s well worth getting advice from a financial adviser, especially if your vehicle operations are key to your business's day-to-day running. They’ll be able to take a deep dive into your circumstances, understand your requirements and talk you through the details so you can make an informed decision. 

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What’s covered by a commercial car insurance policy?

With a commercial vehicle insurance policy, you’re protected if:

  • you travel between different locations for work
  • you drive employees or colleagues around
  • you use your van to commute to any place of work
  • you use your vehicle for work
  • you use the vehicle for anything else on behalf of your business.

How much cover you have depends on which level of commercial car insurance you choose.

  • Third-party only is the cheapest and protects against any third-party damage or injury claims made against your business in the event of an accident. However, your vehicles won’t be covered, and any repairs would have to be made at your own expense.
  • A third-party fire and theft policy also protects your own vehicles for damage caused by fire, if they are stolen, or damage is caused in an attempt to steal them.
  • A comprehensive policy is the most expensive level of cover, but it will protect your own vehicles against any damage suffered during an accident or incident.

Can I cover more than one vehicle?

If you operate more than one vehicle as part of your business, fleet insurance may be a good option. There are also ‘mini fleet’ options available, which are designed to cover businesses with between one and four vehicles. You’ll need to check the small print as policies vary. Some will include a wide range of cover as standard, others will offer additional protection for extra payment, and others will only offer basic cover. What you need will depend on your business, but some of the options to look out for include:

  • Employers’ liability insurance (a legal requirement if you’re employing drivers)
  • Public liability insurance
  • Insurance for driving in Europe
  • Breakdown cover
  • Legal cover

What’s not covered by a commercial car insurance policy?

Commercial insurance policies don’t cover you if your car or van is used for purposes that aren’t under the description of use, or your vehicle is being driven by a driver your policy doesn’t cover. Your policy documents will provide you with the full list of exclusions, but the most common ones are:

  • Theft (if keys are left in the vehicle)
  • Deliberate acts of negligence or recklessness
  • Wear and tear

Can I buy a commercial vehicle for personal use?

Many commercial vehicles are also used in a private capacity by company employees. If your vehicles are used this way, check your insurance policy covers them as they’re often excluded on fleet policies.

What other types of insurance does a business need?

When you run a business, you’re exposed to many more risks than working for someone else. Along with more responsibilities, you also have more assets to protect. There are many forms of insurance that a business may have. Some are compulsory, while others range from extremely important to just nice to have. Your financial adviser or accountant can advise you on which types to prioritise. The main types of business insurance are:

  • Employer’s liability insurance
  • Public and product liability insurance
  • Professional indemnity insurance
  • Building and contents insurance

If you found this article helpful, then you might also find our articles on car gap insurance and how much money you could save with an electric car informative, too!

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About the author
Nick Green is a financial journalist writing for Unbiased.co.uk, the site that has helped over 10 million people find financial, business and legal advice. Nick has been writing professionally on money and business topics for over 15 years, and has previously written for leading accountancy firms PKF and BDO.