Who pays the insurance on a company car?

Company cars are a fantastic perk offered by some workplaces to help their employees carry out their job as best they can.

Company cars are changed regularly, which means you often end up driving a newer model that is maintained by the company which also pays for extra costs, such as road tax and the annual MOT.

For many people, the prospect of driving a car paid for by your employer is enough of an incentive to work hard to earn it. But others may be wondering, who pays the insurance on these vehicles?

We are going to take a look at company cars, what they are, who gets them, and who pays their insurance premiums.

Who pays the insurance on a company car?

In most situations, company cars are insured by the company that owns them. The vehicles are usually insured under a fleet insurance policy.

In very few cases, the company may ask that you arrange your own insurance. However, many insurance providers are hesitant to offer cover to people who do not technically own the vehicle. If the car is leased from the company, getting insurance privately will be easier.

What is a company car?

A company car is a vehicle that is offered to an employee by their employer. It may be used for both business and personal purposes. A company car is usually provided for people with jobs that demand a lot of travel. However, it may also be given to employees as a loyalty reward or bonus.

How does a company car scheme work?

Company car schemes are usually only available for employees in a high-ranking permanent position unless the job itself is transport-based, such as a delivery driver.

Many schemes will also have a company car allowance that covers the cost of petrol for the vehicle up to a certain amount.

Company cars are regarded as a privilege, the costs of which are paid by your employer in addition to your salary. So in most cases, employees who have access to a company car scheme must also pay BIK (Benefit-in-Kind) tax.

BIK tax is a tax for employees who receive perks on top of their salary. The overall amount is based on the employee’s income, the price of the vehicle, the fuel it uses, its CO2 emissions, along with other factors related to the car’s spec. If the company car scheme also includes the cost of petrol, you will need to pay additional tax on your fuel allowance.

Who gets a company car?

Only certain companies have a company car policy and at many of the ones that do, company cars are reserved for high-level personnel. It is likely to be stated in an employment contract if a company car is to be offered.

Company cars are often provided to employees who must travel a lot as part of their job role. A company car may also be given to multiple employees who are only permitted to use it when they need it for work purposes.

Unless your employment contract specifically states otherwise, no one has an automatic entitlement to a company car.

Who pays insurance for company taxis?

Taxi insurance can be paid by the driver or by the taxi company. In most cases, it is paid for by the driver as the driver is usually the owner of the car. This is especially true for self-employed drivers who operate on apps such as Uber or Bolt. However, there are some instances in which the taxi company will pay for the insurance, especially if they own the car.

Taxi insurance is different to regular car insurance. It often includes a form of public liability cover and is generally more expensive given the mileage of an average taxi driver.

What happens if you have an accident in a company car?

The first step to take if you are involved in an accident in a company car is to determine who is at fault and exchange insurance information. If it is another driver or vehicle, then you can hope to rely on them to use their insurance to cover any damage.

If the accident was caused by your own negligence or reckless driving, then you should assess the damage to both your own and any other vehicles involved.

In some instances, if the damage is minor, it may be worth paying for the repairs without making a claim to ensure you are able to continue driving the car and the insurance does not go up for your employer. This also ensures that you will not your claims bonus too.

If the accident was caused by a mechanical malfunction or failure that is linked to the company car not being poorly maintained, then your employer is liable. As they own the car, the responsibility is on them to keep it safe to drive.

The liability is also dependent on when you were driving the car and for what purposes. If you were driving during work hours for purposes related to your job, then the employer may be liable. However, if the accident takes place outside of work hours and you were using the car for personal purposes, then the liability is more likely to be on you.

In every instance, it is important to determine who is at fault, who (if anyone) will claim on their insurance, and to be honest with your employer and their insurance provider as to the circumstances of the accident.

How much is company car insurance?

Company car insurance premiums are usually more expensive than regular car insurance. This is because the cars generally have a higher mileage during busy road hours and are often parked in unfamiliar locations.

Some company cars are also insured under a fleet insurance policy. Fleet insurance covers a number of different drivers on a number of different cars. This adds risks and can also mean that other factors that make the insurance more expensive are taken into consideration. For example, if there is one driver who is under 25 or a driver with a bad driving history it will mean that the overall cost of the fleet insurance policy goes up.

What are the pros of driving a company car?

There are many benefits to driving a company car, not least you get to drive a brand new car for nothing! Here we will take a look at some of the other pros to company cars for both the employees that drive them and the employer.

No financial ties to the car

As we have already seen, in almost all cases, the company that provides the car pay for the insurance on the vehicle. But on top of that, the company must also pay the road tax, MOT, and any maintenance the car requires.

You do not own a depreciating asset

One of the main issues with owning your own car is that cars very rapidly depreciate in value. If you buy a car for £20,000 and then sell it a few years later for £10,000, you would have to put forward another £10,000 to purchase a car of similar quality.

Having a company car, however, takes away that burden from you and means that the company are financially responsible for buying new cars.

BIK rates are low

Benefit-In-Kind tax rates are generally quite low. It is far cheaper to pay tax on a company car or to pay fuel benefit tax on petrol than it is to own your own vehicle.

Creates incentives for employees

If you are an employer, a popular company car scheme can be a great way to both attract new staff and retain existing staff. It gives new recruits an incentive to join the company, and can also incentivise employees to work hard in order to earn such perks.

What are the cons of driving a company car?

Unfortunately, there are some downsides to driving a company car. Here we will take a look at some of the cons.

Vehicle limitations

Every company car scheme is different, but most will not allow you to choose any vehicle you want. For many drivers, this does not matter. However, for others, there are only some vehicles they feel confident driving. For example, you may only have an automatic driving license and the company car selection may be solely manual, or you may prefer to drive an electric car but the company cars on offer are all petrol.

The vehicle is owned by someone else

Although the company owning the vehicle has many benefits, it does also mean that if you leave the job you will no longer have a car. A company car scheme is unlikely to offer a purchase agreement on the car and you may have to part ways with a vehicle you have come to heavily rely upon.

Summary

The insurance premiums on a company car are usually paid for by the employer that owns the vehicle. However, it is still wise to be especially careful when driving a company car as the premiums can be higher than regular car insurance and any accidents you have may result in an even higher premium for your employer.

Company cars are a privilege and many people work years before they are entitled to one. Company car insurance makes sure you are well covered, so you can rest assured knowing that your employer’s car is protected on the roads.