Fleet car insurance – how to insure a company car and who pays the premiums

Fleet car insurance is usually paid for by the employer, but there are exceptions. Here's what fleet managers and company car drivers need to know about insuring a fleet of company cars...

Published10 January 2024

If you’re running a company car, it’s taken as read that your employer will provide the insurance, because your firm should have a policy that covers all the vehicles in its fleet. Better still, that policy will cover you for both business and private mileage.

Having said that, it’s always wise to double-check with your immediate boss or the company’s fleet manager so you know that that's definitely the case, and the car you're driving is fully insured.

After all, you don’t want to find out that your firm has a different policy AFTER you've been involved in a crash in your company car.

Of course, there's a lot more to company car insurance than just hunting down the best premium each year, giving the insurer details and forgetting about it.

So, here's our guide to the various rules, regulations, categories and pitfalls of fleet car insurance, driving your own car for work and more...

What if I need to use my own car on business?

This is when the word "pitfalls" looms large, because if you’re using your own car for business, you need to make sure you have an appropriate insurance policy.

For a start, the term "fully comprehensive" is a misnomer. It doesn’t actually cater for all circumstances, because when setting it up you’ll have to choose between Social cover, Social and Commuting, or Business Car cover.

The entry-level cover is Social insurance, which is more commonly known as SDP (social, domestic and pleasure). An SDP policy will cover you for day-to-day journeys such as visiting the shops, going to the cinema, seeing friends and so on. In essence, the sort of journeys you carry out when you’re not at work.

It's important to note that an SDP policy does not cover you for your commute to work. Now, you might usually walk, cycle or take the bus or train to get to your workplace, but if you have a crash on that one occasion when you do drive to work, your insurance company could well refuse to pay out.

That’s why it’s vital you choose a level of cover that includes commuting (SDP+C).

If you intend to use your personal car for business journeys during the working day – as well as for the commute there and back – you’ll need a proper Business Car policy.

And that’s what we mean by pitfalls. You need to be very clear and honest about what you intend to use your personal car for, otherwise if the worst happens, you could end up with not just the hassle of a damage car but also a very big bill that your insurer won't help you with.

What are the different types of business car insurance?

What – there's more than one type of Business Car policy? Yes, we’re afraid so.

You’ll need to work out beforehand what type of business journeys you intend to make, so that you can choose the correct policy. Here are the difference kinds of business car insurance and what they cover:

Class 1 policy

This is the simplest, and will cover you for occasional visits to see clients, or to visit your company’s HQ. What it won’t cover you for is endless days of motorway travel as you visit customer after customer.

Class 2 policy

This is a policy that includes named drivers, which allows employees to share the driving on work trips. If you’re the business owner, you need to make sure that any staff who will be driving are added to the policy.

Class 3 policy

This is for the serious business-miler. This is the level of cover to go for if your car truly is an office with an ever-changing view. You’ll have to pay more for it, because it has to cater for the fact that you’ll be doing far more miles than the average motorist, but it’s better to be covered than not.

If you’re not sure which type of policy you need, a call to your insurer would be a very wise course of action.

Is commercial insurance the same as business insurance?

Business insurance, commercial insurance – one and the same, right? Wrong. Business insurance covers your staff member for long-distance driving, such as visiting numerous clients in a day – easy peasy.

But if you’re a taxi driver, a driving instructor, or you regularly carry people or goods as part of your job, you’re likely to need commercial insurance. Indeed, the category of drivers covered is described as people involved in “carriage of goods for hire or reward”.

As ever, a conversation with either an insurance broker or your insurer will likely clarify matters, and give you the right cover for your needs.

Will I be better off with a company car?

Yes, running a fleet car instead of your own vehicle is likely to save you money in the long run.

After all, as well as saving on insurance, you won't have to worry about wear and tear, or depreciation. If you do lots of business miles in a car you've bought, you’ll end up getting through tyres and brakes much more quickly, and face higher servicing costs.

Still, you can at least expect your employer to reimburse your expenses, often using approved mileage rates, which are the most you can be reimbursed without having to pay tax on the payments.

So, when it comes to insuring your vehicle, joining your employer’s company car scheme is likely to work out cheaper than using your personal vehicle. And of course, it means you have no concerns about choosing the correct insurance cover.

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