Nearly everyone with a personal car uses it to travel to work, and a fraction of those people use it during work hours for business-related reasons. Did you know that these same people, in the event of an accident, may not be able to file a valid claim? Using your personal car for business purposes means that you require business insurance to protect yourself in case of an accident.
But what constitutes business-related driving? This article will explore this question, as well as the different classes of business car insurance, how to choose the right policy, and more.
What constitutes business-related driving?
Business driving is defined as using a vehicle for work-related purposes other than simply commuting to and from one fixed workplace. In the event of an accident, if you use your personal car insurance to make a claim, your insurance provider will investigate and look for evidence that details the particulars of the event. If they find that you filed this claim during business use, they will likely reject your claim.
The reason there is a distinction between personal car insurance and business car insurance is simple – business driving happens consistently, whereas personal car usage is a lot less frequent.
If you use your vehicle in any of the following common examples of business driving, you will need business insurance to ensure coverage:
- Travelling between multiple locations for work—If you travel from your place of work to a client, supplier, contractor, or any other place related to and in the service of your business, you are using your vehicle for work-related purposes.
- Transporting goods or equipment – We highly recommend business car insurance if you’re delivering goods to customers as a courier or delivery driver, or simply moving tools or other tradesman items between work locations.
- Carrying passengers for work – Work-related driving extends to the simple transportation of clients, co-workers or passengers for work purposes.
- Door-to-door sales – If you use a vehicle to travel when conducting door-to-door sales visits, or any other type of field agent work.
- Self-employed and freelance work – For self-employed individuals who are carrying out freelance work, it may be worthwhile to consider business car insurance.
- Taxi drivers or other private hire services – Your business car insurance covers passenger transport for work purposes, but you may need more specialised policies that cater to roles like taxi drivers, ride-hailing operators or chauffeurs.
Whilst it’s fair to reject the idea of purchasing business car insurance for your own car if your work-related driving is infrequent, keep it in mind if your job role changes for any reason.
What kinds of business car insurance are there?
Several types of business car insurance cover different needs:
- Temporary business car insurance – This kind of car insurance covers occasional work use and one-off business trips, used for employees and freelancers who don’t regularly use their car for work purposes. These policies can last anywhere from a single day to a few weeks and are usually purchased for seasonal or temporary changes to business functions.
- Commercial car insurance – This type of car insurance applies protection for vehicles that are primarily, or exclusively, used as business vehicles. Common examples include taxis and delivery vans. People who often purchase those types of insurance typically rely on the vehicle’s use for income. Check to see if your chosen package includes public liability coverage.
- Standard business car insurance – Day-to-day driving that includes occasional business use. This is best used for employees, or sole traders, who are in roles or industries that commonly feature travel.
- Comprehensive business cover – Comprehensive cover includes full protection, such as accidental damage, theft, and liability. This is a favourite for businesses that use high-value vehicles or travel in large part during their role.
Standard business car insurance – business class
Any type of business car insurance will be subject to a classification of use, which details the purposes for which vehicles will be insured.
- Class 1 business car insurance – This covers occasional business use.
- Class 2 business car insurance – This covers class 1 business car insurance and allows named drivers (employees, for example) to use the vehicle for business purposes.
- Class 3 business car insurance – This covers class 2 business car insurance and is designed for high-mileage drivers, such as salespeople. That being said, it excludes activities covered under commercial car insurance.
How does business car insurance work?
We’ve gone over why, and who, needs business car insurance. But what specific incidents does it cover?
Liability for accidents during business driving
Liability coverage is a foundational aspect of all car insurance. In the event of accidents, business car insurance covers:
- Third-party injury – In the event of a pedestrian or road user being injured as a result of your actions during business driving, business car insurance will cover the medical expenses, rehabilitation or compensation claims on your behalf.
- Third-party property damage – Damage caused to a property by your vehicle during work use, such as other vehicles, fences etc.
- Legal fees – If a claim is made against you following an accident, business car insurance will cover your legal defence.
Coverage for transporting work-related goods or passengers
Business car insurance covers protection for not only your vehicle, but its contents, provided they are:
- Work-related goods – All work-related goods on board your vehicle are covered for damage and theft, such as the tools, materials and goods that are transported for business purposes.
- Passenger for business purposes – All passengers transported for business reasons are covered by your business car insurance policy in terms of medical expenses, rehabilitation or compensation claims.
- Protection for the vehicle – If the business car is damaged or stolen whilst carrying goods or passengers related to work, your business car insurance policy will provide repairs or replacements.
What is the average business car insurance cost?
The cost of business car insurance in the UK will scale with coverage type. The averages are as follows:
| Type of Business Car Insurance | Average Annual Cost |
| Class 1 Business Use | £627 |
| Class 2 Business Use | £750–£850 |
| Class 3 Business Use | £1,886 |
| Commercial Car Insurance | £2,000–£3,000 |
| Temporary Business Car Insurance | £15–£30 (per day) |
| Adding Business Use to Standard Policy | £50–£100 |
| Comprehensive Business Cover (Estimated) | £1,200–£1,500 |
How do you save money on business car insurance?
If you are unsure that the expense of a business car insurance policy is worth it, consider the following.
- Compare business car insurance policy rates – Use a car insurance comparison service, such as MoneySuperMarket or CompareTheMarket, and compare coverage options, premium costs and excess fees.
- Build a no-claims discount – Ensure you maintain a clean driving record by avoiding claims, as many insurers offer significant discounts for each consecutive year without accidents or claims.
- Pay annually – If you are working out a budget overview, consider avoiding monthly instalments. Opt to pay annually if possible, as this allows you to sidestep interest payments.
- Install extra security devices – Equip your vehicle with anti-theft devices, such as immobilisers, dashcams and GPS trackers. This not only ensures your vehicle is safer and recovered quicker but they are considered less of a risk by your insurance provider.
- Reduce annual mileage – Keep your annual mileage estimate accurate, and as low as possible. Fewer miles driven are seen as less risky for insurance policy providers.
- Bundle policies – If you have other insurance policies with a single provider, consider bundling them together. This could lead to discounts, as well as more streamlined debt management.
- Add drivers cautiously – Only add drivers who will regularly use the vehicle, and try to ensure these drivers are experienced and low risk.
- Increase your voluntary excess – By increasing your voluntary excess, you can reduce your premium.
- Use telematics – A telematics or “black box” insurance policy tracks driving behaviour, which is useful for safe and experienced drivers to demonstrate lower premiums.
Conclusion
In the end, whether or not you need business car insurance depends entirely on how often you’ll be driving in a business capacity. It’s still possible to make a successful claim using standard car insurance if business activities are hard to prove, or too light to be considered, but overall we recommend you always look at things, always, from a long-term logical perspective.
FAQ – Can I apply business car insurance to my company car?
No. Business car insurance is designed for privately owned vehicles that are used jointly, or exclusively, for work purposes. A company car can be used in much the same fashion as a business car, but it’s owned by the company. Even if you are the owner of your company, you will be in a grey area with business car insurance. The company car insurance policy ensures you have full coverage.
FAQ – Why is business car insurance more expensive than standard car insurance?
Your business car insurance is more expensive than a standard car insurance policy due to the following:
- Increased mileage – Business vehicles typically cover more miles, as business hours are typically a consistent, weekly thing. This increases the risk of accidents.
- Diverse driving conditions – Businesses often involve driving during peak traffic hours, and oftentimes through territory unfamiliar to you.
- Frequent stops – Activities like deliveries, or client visits, involve more stops. This makes it much more likely than usual to become a victim of accidents or theft.
- Carrying goods or passengers – Work-related items have a monetary value that must be covered by business car insurance, as well as passengers, adding high levels of liability.
- Higher claim likelihood – Business vehicles are statistically more likely to be involved in claims than personal vehicles.
FAQ – What documents are required for business car insurance?
The documents required for business car insurance typically include:
- Vehicle Registration Certificate (V5C) – Proof that the car is registered to the business or individual.
- Proof of Business Use – Documentation showing the vehicle is used for business purposes, such as invoices, contracts, or a letter from the employer.
- Driving Licence(s) – Valid licences for all drivers covered under the policy.
- Proof of Identity – Personal identification for the policyholder, such as a passport or utility bill.
- No-Claims Discount Proof – Evidence of your no-claims history (if applicable).
- Company Information – If registered to a business, details such as the company name, registration number, and address.
- Payment Information – Bank details or a credit/debit card for payments.
- Driving Records – If requested, details of any convictions or penalties for named drivers.
- Fleet Details – List of all vehicles to be insured, including registration numbers and driver assignments.
Always check with the specific insurer, as requirements may vary.
FAQ – Can anyone drive a car with business car insurance?
No. The reason is simple – business car insurance covers two things:
- The car – Self-explanatory.
- Named drivers – Drivers who are authorised to use these vehicles for business purposes.
To drive any car, you need a policy with a “Driving Other Cars” (DOC) extension – which is rarely included in business car insurance. When it is, it’s often applied only to personal use, and not business use.
FAQ – Can I claim VAT on business car insurance premiums?
No. In the UK, insurance is exempt from VAT. You may be able to deduct the cost of premiums as a business expense when calculating your taxable profits, provided that the vehicle is sued for business purposes.
FAQ – Does business car insurance cover international travel?
Many business car insurance policies cover international travel. Coverage for driving abroad may be included as standard in some policies, particularly within the EU, or may require a premium.