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Business car insurance

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What is business car insurance?

Business car insurance is no different to standard car insurance. When applying for a car insurance policy, we'll ask you few questions about how you use your car. You'll see an option to state you'll be using your car for business use. Whenever we use the term 'business car insurance' we're referring to 'insurance that covers your car for business use'.

Business car insurance covers you when you’re using your own car for certain types of work-related driving. This includes driving to meetings or between different sites or offices.

If you’re using your car for work - and not just the daily commute - it’s likely you need to add business car insurance to your standard policy.

This type of driving is considered higher risk by insurers. This is because you're likely to be driving during the busiest times of day, often on unfamiliar roads.

If you’re a delivery driver, then you'll need commercial van insurance. Taxi drivers need specialist taxi insurance.

Do I need business car insurance?

If you use your car for work-related purposes on top of commuting to one place, you'll need business car insurance.

Examples of work-related driving include:

  • Driving to meetings and appointments
  • Sales visits
  • Using your car to get to training courses or company away days
  • Regularly driving to another office or making site visits
  • Running business errands like driving to the bank or post office
  • Driving your colleagues or clients

If you aren’t sure if you need business car insurance, talk to your current insurer.

It’s easy to amend your car insurance for business use. Without it, your existing policy might not pay out if you have an accident while doing business-related driving. You could also be charged for driving without insurance.

Company car drivers don’t normally need to arrange business car insurance. This is because insurance is likely to be arranged automatically as part of your package. If in doubt, it’s important to check.

What type of business car insurance do I need?

There are 3 classes of business car insurance. Which one you need depends on how you use your car.

  • Business car insurance class 1 is usually the cheapest type of business car insurance. It covers you if you’re driving to visit customers or between different sites or offices. You might also be able to cover your spouse if they’re driving the car for your business.
  • Business car insurance class 2 gives you the same coverage as class 1. You can also add a named driver like an employee or colleague, who can also drive the car.
  • Business car insurance class 3 is usually the most expensive class of business car insurance. These policies cover you for long-distance driving and unplanned meetings (commercial travelling). This makes them suitable for travelling salespeople who might also be carrying samples.

How much is business car insurance?

The average price of a business car insurance policy is £1,1371 but your own policy price depends on:

  • Your Class of use
  • The class of insurance you need and your occupation
  • Your estimated mileage

Your insurance might be more expensive if you have to regularly drive long distances. This is because your insurer might see you as having a greater risk of an accident.

The cheapest policy isn’t always best, but there’s no point in paying for cover you don’t need. Different business car insurance policies have different levels of cover. So it’s important to check how much cover the policy you’re considering offers and whether it's at the right level for you.

1 Based on average business use car insurance policies from August 2021 to August 2022

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Can I get temporary business car insurance?

Yes, you can get temporary business car insurance. Short-term business car insurance is flexible, lasting from 1 hour to 28 days.

This could work out cheaper if you only need to use your car for work-related driving every now and again. This could include driving to a corporate weekend away or training course.

Several insurers offer temporary business car insurance. Many offer instant cover, so you can drive away within a few minutes of finding a policy.

Head over to our temporary car insurance page to find out more.

Who pays for business car insurance?

Usually, your employer pays for the additional cost of your business car insurance, so it’s worth talking to them.

If your employer doesn’t fully pay for your business car insurance costs, they might contribute towards mileage during working hours.

If you’re self-employed, your business is the one to pay the bill.

How much will my employer pay per mile?

It varies by employer, but the standard rates are 45p per mile for the first 10,000 miles and 25p per mile thereafter.

These are the standard rates set by the HMRC’s Approved Mileage Allowance Payment (AMAP) rates and they apply to both cars and vans.

What do the AMAP rates cover?

AMAP rates cover the cost of running and maintaining your vehicle.

This includes:

  • Fuel, servicing and maintenance (including your MOT) and any repairs
  • Car insurance
  • Road tax (vehicle excise duty, or VED)
  • Wear and tear

AMAP rates don’t cover:

  • Motorway tolls
  • Parking fees
  • Congestion charges
  • Other incidental expenses

You can claim tax back on these expenses in addition to the AMAP rate if you can show you’ve made them ‘wholly and exclusively’ for business purposes.

To calculate your business mileage simply multiply the amount of miles you have driven on work related business by the appropriate rate for your vehicle.

It’s important to note that if you have any passengers in the car who work for the same business as you, you’ll be able to claim an additional 5p per mile.

Can I get a tax refund on my business car insurance if I’m self-employed?

Yes, you can get tax relief on your business car insurance if you’re self-employed.

This is because business car insurance is seen as an 'allowable expense’ by HMRC along with:

  • Repairs and servicing
  • Fuel
  • Parking
  • Hire charges
  • Breakdown cover
  • Vehicle licence fees

What details do I need to get a business car insurance quote?

Having the following information to hand will speed up getting a business car quote:

Personal details

  • Your occupation, address and age
  • Any points on your licence as well as the conviction code
  • Previous claims or accidents from the last 5 years
  • Additional drivers you want to add to your policy
  • Details of your no-claims bonus (NCB) in years

Car details

  • Registration number or make and model of your car
  • Any modifications made to the car
  • Estimated annual mileage

How can I get a cheap business car insurance quote?

To keep the cost of business car insurance down, you might want to:

  • Consider using a black box or telematics policy that rewards careful drivers with lower costs
  • Be accurate with your annual mileage, so you’re not paying for miles you don’t need
  • Install security devices in your car
  • Park your car with security in mind - a locked garage is better than street parking
  • Pay annually rather than monthly
  • Increase your voluntary excess - if you’re willing to pay more towards a claim, you should see your premium fall

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What our car insurance expert says

If you use your own car for work - like driving to different locations - you’ll need to add business use to your policy. When you get a quote make sure to select ‘business use’ to only show policies that include it – this should cover you if you’re driving your car for work reasons.
Alex Kindred car insurance expert signature

Alex Kindred

Car insurance expert

Need more help?

Can I add a named driver to my business car insurance?

Yes, you can add drivers to your business car insurance policy. If you get in touch with your insurer, they should guide you through the process. They might ask you for:

  • The additional driver's occupation
  • Any details of past car insurance claims
  • Any motoring convictions from the past 5 years

Adding a driver to your policy could bring your costs up or down, so it's worth checking before you commit to adding them.

Do I need business car insurance if I have a company car?

If you have a company car, it's likely that your employer has arranged business car insurance. But it's worth checking - you don't want to be driving around without the right cover in place.

What’s the difference between business car insurance and commercial car insurance?

The main difference between business car insurance and commercial car insurance is that:

  • Business car insurance is for those who use their car as part of their job
  • Commercial car insurance is for those whose car is integral to their job

For example, couriers, driving instructors and delivery drivers all need to use their cars to work.

This comes with an added risk as you're carrying goods and people as part of the job. This requires a specialist car insurance policy.

Will my standard policy no-claims discount be affected if I claim on business car insurance?

If you've added business use to your existing car insurance policy, you only use your standard no-claims bonus. So, if you had an accident while on a business trip, your no-claims bonus is likely to be affected.

If you're using a company car, your policy might have its own no-claims bonus. Claiming on your company car insurance policy shouldn't impact any no-claims you've built elsewhere.

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