Motor Trade Insurance Policies and What They Cover

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Motor trade insurance policies also known as motor trade road risk insurance refers to an insurance policy that covers you while driving vehicles on the road. This policy is designed for individuals or companies dealing with a business in the motor trade. This can be anything ranging from car sales, garage, vehicle service and repair, vehicle breakdown recovery, delivery business among others. In simple terms, if your business requires you to have customer’s cars, motorbikes or vans in your custody, control or care, then it is a requirement by law to take up motor trader’s policy.
Motor traders policy differs from a private motor policy in that it specifies the driver only while private motor policy specifies the driver and the specific car, motorbike or van. Thus, as a driver, you are not required to take up insurance for any vehicle under your control or custody but one policy covers for any vehicle that you use for motor trade purposes. While this policy does not define the specific registration number of the vehicle, you are required to specify whether you own the vehicle, use it for trade purposes or simply under your care. This is important especially if you have several customer vehicles under your care or in instances where your stock is customer vehicles.
What trader’s policy covers
There are four main parties covered under motor traders insurance policies:

  • The driver specified in the policy. In most cases, this is the same person applying for insurance.
  • The vehicles owned by the driver specified in the traders policy or the spouse of the specified diver.
  • Vehicles of customers in your care, custody or control. This covers the vehicles only used for trade purposes or simply put those in respect of motor trade use.
  • Trade vehicles and this is mainly a requirement if you buy and sell cars.

Cover level
Cover level in regards to traders policy answers the question to what extend do you want to protect your vehicle or your customers vehicle. There are three different cover levels covered under motor trader’s insurance policies.
Third Party Only (TPO)
This is a minimum legal requirement to drive a car on the road in most states. TPO covers loss, injury or damage that is inflicted on a third party while driving. The definition of a third party refers to pedestrians, other cars or any other road user. Third Party Only does not cover you or your customer’s vehicles, thus incase of loss or damage to your vehicle or your customers, you will be forced to bear the losses individually. Although the premiums could be lower than for other cover levels, this cover is not recommended as an ideal trader’s policy since it defeats the whole objective of taking up an insurance, which is to restore your financial to the same level you were in before the loss or damage occurred.
Third Party Fire and Theft (TPFT)
This level is a better than TPO explained above. This is because on top of covering third parties, TPFT covers loss of your own vehicles or that of your customers due to fire or theft. This implies that if you lose your car or your customers in the event of a fire or burglary, then you will be compensated. The premium could be higher than that of a TPO but it is better since it provides an extra layer of security to a motor trader.
Comprehensive policy
This is one of the best levels of motor traders policy. The comprehensive policy as the name suggests covers third parties, third party fire and theft as well as accidental damage that occur to your vehicle or that of your customers. For instance, if the vehicle is damaged during servicing, the comprehensive policy will pay for the repairs.

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