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How does company car insurance work?

Company cars are usually insured by your employer, but if you use your personal car for business things can get more complicated. Here's what you need to know...

Car crash

Worried about insuring your company car? Don't be. In most cases insurance is arranged by your employer. They'll take out a policy that covers all the cars on the company fleet, and that insurance will cover the firm's employees for both business and private mileage. It never hurts to ask your boss or fleet manager the question, but it would be a surprise if you aren't covered by your employer.

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

This is where things get more complicated. If your employer doesn't supply you with a car and instead you use your own vehicle for work trips, you'll need to think carefully about insurance.

Don't make the mistake of believing that a 'fully comp' policy covers all eventualities and every type of journey. You'll need to check whether you have 'social' cover, 'social and commuting', or 'business car' insurance. 

Social insurance (also known as SDP: social, domestic and pleasure) is the most basic and means you're insured for things like trips to the shop, visiting friends and family, popping to the gym – the kind of everyday journeys that many of us make, whether or not we are in work.

The big exclusion from social insurance is commuting. If you ever use your car to get to work, even if you usually walk, cycle or take public transport, you will need social and commuting cover (SPD+C). If you don't arrange commuting cover and you have a prang on the way to the office, your insurer could refuse to pay out.

Work journeys that go beyond commuting are treated differently. If you intend to use your own vehicle as a substitute for a company car, business insurance is needed.

People arguing after car crash

What do I need to know about business insurance?

The first thing you need to know is that there's more than one type of business insurance, and the kind you need will depend on the type of business journeys you make.

Class 1 is the most basic. This will cover you for the odd trip to visit head office or a client, but not if you are repping every day.

Class 2 includes named drivers, so you can share the driving on work trips. You'll just need to add any co-workers who will also be driving to the policy.

Class 3 is aimed at sales professionals and other workers who spend much of their time out on the road. If your car really is your office, this is the cover to choose. It will be more expensive than Class 1 or Class 2 cover, though.

If in any doubt, call your insurer, describe the type of journeys you'll be making and how often, and see what they advise.

Warning triangle in front of car crash

What else do I need to know?

It's worth understanding the differences between business insurance and commercial insurance. If you carry people or goods, commercial insurance may be a better fit than any of the three classes of business insurance.

If in doubt, talk to your insurer or an insurance broker who will be able to find you the most appropriate type of cover.

Wouldn't I be better off with a company car?

Quite likely. If you start to use your own car at work, there's more than just the additional cost of insurance to consider – you'll also be putting more miles on the car and getting through consumables, such as tyres, at a faster rate. You can 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.

If your employer runs a company car scheme and you're eligible to join it, doing so is likely to work out cheaper than running your own car; not having to worry about insurance for your company wheels is another one of the perks.

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