What is Business Use Car Insurance?

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Business use car insurance covers privately-owned cars for certain aspects of work-related driving, such as travelling to clients and between different work locations. The type of work-related driving you do determines which 'class' of business use you need, and you can extend cover to include co-workers or employees. Below we explain what's covered and how to decide if you need business car insurance.

A Guide: What is Business Car Insurance?

Business car insurance is like regular car insurance, except it also covers certain aspects of work-related driving. Specifically, business car insurance can cover your privately-owned car when you drive to visit clients, travel between different work locations and make sales calls. You can even cover someone else to drive your car for your business.

Business car insurance is not for company-owned cars (they should be covered by commercial vehicle insurance).

How to add business insurance on car

To cover your car for business usage, you need to alert your existing insurer as to the change or you can make the distinction when you renew or take out a new policy if you expect you'll start driving for work in the near future. You need to be insured for business driving before you start clocking miles for work—or else you won't be covered.

When filling out an application online, you can indicate that you want cover for business usage when answering the question, "What will you use the car for?" There are usually 6 options to choose from. (In the next section we'll define what these different business options mean.)

Car Insurance Classes of Use

  1. Social, domestic and pleasure
  2. Social, domestic, pleasure and commuting
  3. Business use by you (Business Class 1)
  4. Business use by you and spouse (Business Class 1)
  5. Business use for named drivers (Business Class 2)
  6. Commercial travelling (Business Class 3)

What is 'commercial travelling'? Commercial travelling refers to the type of driving a travelling salesman might do—driving long distances as part of your work to carry out unscheduled sales calls, for instance. It's not commonly used.

Who Needs Business Car Insurance?

You need to insure your car for business use if your driving falls under one of three 'business usage' categories—but what actually is 'business use'? Below we list definitions for the three different classes of use so you can see if your driving constitutes business use for car insurance purposes.

What are business class codes/uses for car insurance?

  • Business Class 1: Covers business driving away from your regular office to multiple work sites or to visit clients or customers. Many insurers let you include your spouse in the coverage so long as their business driving is for your business (not, for example, for their own job). You should also be covered for regular day-to-day driving (e.g., for social, domestic and pleasure driving and commuting to/from your permanent place of work).
  • Business Class 2: The same work-related driving coverage as Business Class 1, but expanded to cover an additional named driver, for instance an employee or co-worker.
  • Business Class 3: Covers long-distance use to make business calls without prearranged appointments (e.g., a travelling salesperson). This is be referred to as 'commercial travelling'. You're usually allowed to carry samples, but if you make deliveries you'll need commercial car insurance instead.

The distinction between the different categories lies in who will drive the car and what type of business driving they do. FYI, when you fill out a car insurance application on a comparison site, you may only need to initially specify 'business use', not a specific class of cover.

Note: before adding an employee or a co-worker onto your business car insurance policy (Class 2), you might want to check their driving record for penalty points, disqualifications or to see which vehicles they are eligible to drive.

You might need business car insurance if you are employed by someone else, or if you are self employed. Here are some examples to show different scenarios when someone might need to specify business use on their car insurance.

Examples

  • A carer uses their personal car to drive between their clients' homes. They need Class 1 business use.
  • A self-employed piano teacher drives his car to visit students every evening and weekend. He needs Class 1 business use.
  • You are employed as an estate agent by a local company. You drive your own car to drive between home showings. You need Class 1 business use.
  • A nanny uses her car to run errands and drive the children around to play dates and after-school activities. She needs Class 1 business use.
  • An architect names their assistant as a named driver on their business car insurance policy so that the assistant can help out with driving on longer journeys to visit far-afield client sites. They need Class 2 business use.
  • A paper salesman uses their own car to drive around the UK visiting small businesses to sell paper supplies. They need Class 3 business use cover.
  • A pizza delivery person would not be covered under 'business use' so they need commercial vehicle insurance, which covers getting paid to deliver goods.

What does Business Car Insurance cover?

Business car insurance covers your normal day-to-day driving, commuting and also work-related driving to other work locations or client sites. Here are the different types of driving that a business car insurance policy can cover:

  • Social, domestic and pleasure driving
  • Commuting to and from your permanent place of business
  • Driving between multiple work locations
  • Driving to visit clients or customers
  • Other driving related to your business (e.g., to the bank or post office)
  • And possibly 'commercial travelling,' which is essentially for certain salespeople (this falls under Business Class 3)

Next, let's look at the extent of coverage available on business car insurance policies. There are three types of car insurance coverage you can buy for business use, which are the same as for regular car insurance: TPO, TPFT and Comprehensive.

Third Party Only

Third Party Only (TPO) business car insurance is the most basic kind of cover available, and it provides the minimum level of cover required by UK law. TPO insurance protects against costs resulting from injuries to other people and damage to their property (e.g., car, wall, etc.) if you are at fault in a collision. Third Party insurance doesn't cover damage of any kind to your own car, or for theft of your car. Third Party Insurance pays out to compensate a third party only—never to compensate you.

Third Party, Fire and Theft

Third Party, Fire and Theft (TPFT) insurance includes the coverages included in TPO insurance, plus protection for your own car if it's damaged in a fire or stolen.

Comprehensive

Comprehensive car insurance offers the widest range of protection. In addition to including the coverages included in TPO and TPFT policies, you can also be covered for injury to yourself and damage to your own car in the case of an accident (and sometimes for other events like flood damage).

FAQs

You need business car insurance if you use your car for work-related driving beyond commuting to and from a permanent place of work. For example, if you drive between multiple work locations, drive to client's premises or do other work-related driving then you need business usage cover instead of just personal cover. However, if you make deliveries or transport goods or people for money, or transport goods, tools, stock of any nature you'll need commercial car insurance—declaring 'business use' won't be enough.

Yes, the three classes of business car insurance also provide cover for social, domestic and pleasure driving.

While business use does cover commuting, if your only 'work-related' driving is to/from a permanent place of business then you do not need to pay even more for 'business use' on your car insurance—however you do need to declare your commuting to your insurer so they can add this to your regular car insurance policy, which could increase the cost of your car insurance somewhat.

If you're caught without business car insurance in the UK, you're essentially an uninsured driver. In that case your insurer won't cover any claims, for instance if you have an accident while driving to a client's premises.

If you're self employed you can claim vehicle expenses such as insurance, repairs and servicing, breakdown cover and fuel for work-related driving (e.g., visiting a client). But you can't write off your non-business driving or normal commuting. Alternatively you can claim simplified expenses using a flat rate for mileage instead of claiming the actual costs of buying and running your vehicle.

Business car insurance is just like regular car insurance, but it also makes it legal for you to drive for work in certain situations—driving between multiple work locations, visiting clients, etc. These activities are not covered under a normal car insurance policy. (Note: Commuting between home and a permanent work location are covered under regular car insurance so long as you've declared you usage as 'social, domestic, pleasure and commuting'. And business car insurance does not cover delivery of goods or services like driving paying passengers.)

Yes, if you are claiming mileage that means you're driving for work—and if you're driving for work then you are legally required to have business car insurance. If you drive for work without business car insurance you will not be covered and are essentially 'uninsured'.

A nanny needs business car insurance if they use their car to drive the children from place to place, run errands, or perform any other aspects of their job—or if they have multiple nanny jobs they drive to. A nanny may not need business car insurance if they work for only one family and they only use their car to travel between their home and their employer's home and the beginning and end of each day (that is, they never drive the children or run errands for their employer).

Class 1 business use for cars essentially covers work-related driving such as travelling between multiple work locations and visiting client sites. It does not cover getting paid to make deliveries or drive passengers (that's 'commercial' use). It also wouldn't cover travelling salesman (that falls under Class 3).

Business car insurance offers similar coverage to regular car insurance, it just also covers certain work-related driving you might do. To get business car insurance you need to declare to your insurer that you use your car for business (as opposed to just social, domestic, pleasure and/or commuting).

You should have business car insurance if your employer asks you to use your car for work-related activities or you are self employed and you use your car for your business. Work-related driving that falls under business use includes driving between more than one work location, driving to see clients, running work errands, etc. but not making deliveries or driving paying passengers.

No, 'business use' does not cover food delivery. Food delivery drivers need courier insurance (you can actually buy specialised 'food delivery insurance') because none of the three classes of 'business use' on car insurance cover the delivery of goods.

Yes, business car insurance typically costs more than personal car insurance. Personal car insurance is cheaper than business car insurance because of the lower risk profile (fewer miles, less chance of theft, etc.).

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