Business Car Insurance Classes Explained

What are the different types of business insurance and which class do I need?

The world of insurance can be a tricky one, but we’re here to break business car insurance down so you know exactly what you’ll need to protect you, your car, and your business.

If you use your car for work, you’ll likely need business car insurance (or company car insurance, as it’s commonly known).

If you only use the car for commuting to and from work, you’ll be covered by your regular social, domestic, pleasure and commuting insurance, but if you use your car for business purposes – like travelling to clients – you will need specific business car insurance.

There are three different classes of business insurance, and which class you’ll need is dictated by who is using the car, and what you’re using it for.

With the average company car driver covering more than double the mileage of domestic drivers, it’s important that you’ve got the right level of coverage so you’re protected should you end up being involved in a crash.

It’s simple enough to take out business insurance: you can either let your existing insurer know about the change, or you can search around for a new policy if you know you’ll soon be clocking up the miles for work. You just need to indicate what you’re using the car for on the online forms, and your insurance provider will do the rest.

And if you're looking for an easy way to spread the cost of your next company car, business car leasing allows you to get behind the wheel for a fixed monthly payment so you can balance the books and enjoy the ride.

Do I need business car insurance?

If you run business errands during the working day, travel to meetings or between sites, drive colleagues or business contacts around, or allow your employees to drive your car, you’ll need to take out business insurance.

This isn’t a comprehensive list, but it is a good place to start if you’re unsure of whether you’re covered by your regular car insurance.

What are the three classes of company car insurance?

1. Business Class 1

Business Class 1 insurance will cover your business lease car if you only use it for short work-related journeys.

You’ll need this level of cover if, during the workday, you use your car for business purposes, like visits to other sites or customers, but no one else is driving it. Class 1 insurance does often cover your spouse too, provided that any business driving they do is solely for your business, and not their job.

Class 1 business insurance also covers you for all your regular day-to-day driving, like visiting friends or commuting to and from work.

2. Business Class 2

This has the same level of coverage as Class 1 insurance but adds the benefit of being able to put another named driver on the policy.

If you own a small business with only one or two vehicles, this is likely the level of coverage that’s going to suit you – you’ll be able to add an employee to the policy so they can also use the car for business journeys, saving you the hassle of having to take out multiple insurance policies.

3. Business Class 3

As well as providing all the cover of the Class 2 insurance, Class 3 business car insurance goes that extra step further and insures you to make unlimited long business journeys without a set destination.

If your work involves something like door-to-door sales, this is the level of coverage you’ll need. Usually, you’ll be allowed to carry samples under the policy, but if you’re going to make deliveries, you need commercial car insurance.

Business car insurance examples

Whether you’re employed by someone else or you’re self-employed, if you’re using your car for work, you’re going to need business car insurance.

For example, a nanny who uses their car to run errands and cart their charges about after school to various activities will need Class 1 business insurance, as will an estate agent employed by a local company but using their own car to drive between viewings.  

But if, for example, an architect’s assistant was using their boss’ car to drive to client sites, the architect would need to take out Class 2 business insurance to make sure they’re both covered.

And if you were a travelling paper salesman using your own car to drive around the UK to sell your wares, you’d need Class 3 insurance to make sure you (and your paper samples) are properly insured.

Is business car insurance more expensive?

Ultimately, yes.

Insurance companies will see cars being used for work as more of a financial risk: you’re driving longer distances, and a lot of the time those miles will be clocked up on unfamiliar roads.  

On a law of averages, a company car driver is more likely to end up making a claim.

This can make premiums for business vehicle insurance higher than for standard car insurance, but the process is the same. You’ll still be asked questions about your age, where you live, and the car you drive, as well as your type of work, how often you drive, and the distances you’ll be travelling.

How can I save money on my business car insurance?

In much the same way as you can on any insurance.

Be mindful of the car you’ve chosen: if you want to save money, picking a car in a lower insurance group can reduce your premium because the insurance company won’t have to pay out so much money in a claim.

Be accurate with your expected mileage too, for both domestic and business use. If you overestimate how many miles you drive every year, you could end up paying more than you need to.

And if you often stay away from home when you’re travelling for work, your insurance company might ask where you’re going to keep the car. If you can park it in a secure garage or car park, your premiums might go down.

It’s also worth considering whether you need an annual policy.

If you rarely use your car for work, some insurance companies offer temporary insurance for a specific length of time, so you don’t have to pay for a policy you’re only going to use once or twice a year.