Becoming self-employed can have many benefits. There’s no boss to report to, you can work when and where you want and, hopefully, achieve a better work-life balance. But the absence of a regular salary, sick pay and employer-arranged pension means you’ll need to take more responsibility for managing your finances. Car insurance might not be the first thing that springs to mind in that mix. But it’s something you’ll need to pay a little attention to if you decide to work for yourself – especially if you drive your car for business reasons. Here’s what you need to know about self-employed car insurance.
Put simply, self-employed car insurance is car insurance for people who work for themselves. While this may seem like stating the obvious, in practice it’s not quite that simple. That’s because the type of car insurance you’ll need if you’re self-employed will depend on whether you use your car for business purposes or not.
You’ll probably know whether you qualify as self-employed or not, especially if you’ve been working for yourself for years. But, for the avoidance of doubt, let’s spell it out. According to the government: “A person is self-employed if they run their business for themselves and take responsibility for its success or failure”. You won’t have a manager that you’re directly accountable to, you won’t get paid a salary via PAYE, and you won’t have the rights and benefits of an employee (such as sick pay, a workplace pension, or minimum notice periods).
In some cases, an individual can be employed and self-employed at the same time. For example, they might work for an employer 3 days a week and run their own business 2 days a week.
This depends on the nature of your work and, more specifically, whether you use your car in the course of running your business.
Not necessarily, though it can be. As always, it depends on your personal circumstances and the insurer’s underwriting criteria.
If you simply shift from working for an employer to working on a self-employed basis, but the nature of your job remains the same – market researcher, for example – your premium may not change at all. This will depend on the specific provider.
In some cases, you may even find that your premium goes down. Let’s say, for example, you previously had to commute into an office, and so your policy included commuting. If you switch to working for yourself, and this means working exclusively from home, you may not need to use your car for commuting. This could reduce your premium.
In other cases, your premium might go up. This might apply if:
Regardless of how it might affect your premium, it’s important not to withhold information about any career change from your car insurer. This could invalidate your insurance and leave you without cover in the event of an accident.
Car insurance if you’re self-employed offers exactly the same levels of cover as car insurance for anyone else.
Assuming you don’t use your car for work purposes and only need standard car insurance, you’ll have a choice of 3 levels of cover:
If you use your car for work purposes, then yes, you’ll probably need a dedicated business car insurance policy. Standard car insurance usually won’t cover you. If you’re happy with your insurer, it’s worth checking just in case though. Some policies may cover the odd trip to a different work location than your normal one as standard, or allow you to add this on to your standard policy for an extra fee.
If you require a business car insurance policy, the type of insurance you’ll need will depend on the nature of your work. There are 3 main levels of business insurance:
Professional drivers, such as chauffeurs or taxi drivers, will need a different type of cover entirely (commercial car insurance).
If standard car insurance won’t cover you, but you only need to travel to other places of work rarely (once or twice a year, for example), you could consider taking out temporary business car insurance as and when you need it. This is more expensive per day, but it may be cheaper to buy this on top of standard cover than to buy a full year of business insurance.
The first step is to establish what kind of car insurance you need if you’re self-employed. Regular car insurance will be fine if you only use your car for personal reasons, or for commuting to and from a regular workplace. If you frequently use your car for other work purposes, such as visiting clients, you’ll need business car insurance. Think in advance about things like who will need to drive your car (such as any employees) and how extensively you’ll travel for business. These factors will affect the class of business insurance you need.
Either way, your best starting point is to work out exactly what your needs are, then use a price comparison site to get quotes. Some companies, such as Direct Line, don’t appear on price comparison sites so you may also need to get a few quotes directly with insurers. If your circumstances (or your business) are unusual and you struggle to find affordable cover through mainstream providers, you can also try specialist brokers.
Bear in mind that cheap and best are not the same thing. You want a good-value policy that offers the cover you need at the right price. So, make sure you’re comparing like-with-like when you get quotes.
For any type of car insurance, you’ll need to provide:
If you need business insurance, you’ll also need to be able to provide more precise details of how the car will be used. For instance, for office travel, to deliver supplies or to visit client or job sites.
Yes, provided that you use your car for work purposes (excluding commuting to and from your regular place of work). If you take out business insurance, this should be tax deductible. So are other costs related to using your car for business, such as fuel and parking fees.
Yes, and if you don’t, you could risk invalidating your policy. This means you’d be left driving uninsured and without cover if you need to make a claim.
That’s not only because becoming self-employed might mean you need to use a car for work purposes that was previously driven only for personal use, but also because many insurers use the type of work you do as a criteria for setting their premiums. Even if, as far as you’re concerned, you’re doing the same job as you were for an employer, an insurer might see it differently.
So, tempting as it might be to try to keep premiums down by omitting to mention your self-employed status, don’t. It might even prove pointless, as being self-employed might not affect your premiums at all. And it could prove a costly mistake if you have an accident.
You’ll also need to proactively notify your car insurer if you become self-employed part way through your policy term. Failure to do so risks your policy being invalidated from the point the job change happened.
Whether you need standard or business car insurance, there are ways to keep costs down.
Arranging car insurance if you’re self-employed doesn’t need to be any more hassle than for anyone else. But you do need to tell you insurer about career changes, and make sure you choose the right cover for the kind of driving you’ll do. In some cases, this could mean having to pay a bit more for your car insurance. That said, there are plenty of ways to keep costs to a minimum. You might even be able to claim your car insurance as a tax-deductible business expense.
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