The website for aspiring small businesses, Startups, explains the ease with which you might set up as a motor trader.

One of your first steps before beginning any such business – whether you set up as a full-time formal company, sole trader or even on a small-scale, part-time basis is to arrange motor trade insurance, argues the website.

So, what is motor trade insurance and why is it likely to be so essential to your business?

By way of an answer, it may be helpful to look at the three essential components of the typical motor trade insurance policy – while acknowledging that there are probably as many different types of cover as there are motor trading businesses:

Motor trade road risks insurance

• this component provides the minimum third-party insurance cover required by law;
• as with other types of motor insurance, however, it is also possible to upgrade the cover to third-party, fire and theft or to fully comprehensive insurance;
• given the value of the vehicles likely to come into your control and the risks to which they are exposed, the higher levels of cover may be appropriate for most businesses;
• provided you register as a motor trader – and earn the right to use trade plates – your motor trade insurance covers any vehicle that any of your named drivers uses for purposes of your trade;
• if you arrange comprehensive cover, your motor trade insurance protects against loss or damage to both your own trade vehicles and your customers’ cars;
• under this heading you might also arrange the cover necessary when potential buyers want to make an accompanied test drive of one of your vehicles;

Motor trade premises insurance

• if you are operating from premises that you own or lease, this insurance may cover theft, loss or damage to the property and the tools, machinery and equipment used in your business;
• it may also extend to any vehicles kept on the premises – including those owned by the business and by your customers, together with their personal possessions;
• in the event of loss or damage to your premises or essential tools, this element of your motor trade insurance may also offer financial compensation for the business interruption that results;

Motor trade liability insurance

• your liabilities as a motor trader – however large or small your operations – are many and varied, and represent potentially considerable financial risks;
• in the course of your normal business activities, for example, a customer, supplier, neighbour or passing member of the public may be injured or have their property damaged, claiming your liability;
• the expense of defending any such claim – or meeting it in the event of the claimant succeeding – may be covered by your motor trader’s public liability insurance;
• similarly, your repair, servicing or maintenance of customers’ vehicles may be met by claims of defective workmanship and actions to seek damages – and your indemnity lies in the liability insurance of your motor trader’s cover;
• an essential component of your liability cover is employers’ liability insurance, which you are legally obliged to arrange for a minimum of £5 million – although indemnity is often provided for as much as £10 million.

The many variations which may be incorporated into motor trade insurance tailored to the individual needs and requirements of your own business are too many to mention in this brief guide. You might, therefore, want to consult a specialist broker to arrange the cover suitable for your needs.