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Which is best: Business Car Insurance or Company Car?

If you need to drive for your job, there are a couple of options you may be offered by your employer to cover you.

The two we will be focusing on in this piece are the most common: business car insurance and a company car. In this piece, we’re going to be breaking down the ins and outs of each option, as well as comparing the two. Let’s begin…

We have written a guide to Business Car Insurance which covers the topic in more detail, but to give a short overview, business car insurance is where you already have your own car but the company you work for gives you extra money on top of your salary to pay for business insurance. You organise this insurance yourself.

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If you’re in an accident while travelling for work purposes and you don’t have business insurance, you will be unable to submit a claim – if you do, this is considered an offence. 

Work purposes could be travelling to client meetings, travelling between different work locations or driving around your colleagues. Driving to and from work, however, is considered personal use.

Most of the time, the cost of the insurance is based on mileage allowance, so you need to make sure that you actually need business insurance before you sign an insurance contract as it will increase your premium.

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Company Car

A company car is a new car given to you by the company you work for. They take care of everything including insurance, maintenance, services etc, meaning you don’t have to worry about having financial responsibility. 

Sounds perfect, but there’s one small catch – if you are using the car for personal use, you have to pay company car tax, also known as BiK (Benefit in Kind). Unfortunately in the eyes of HMRC, travelling to and from work counts as personal use, so you will have to pay BiK. This is taxed as part of your overall income. 

The amount you pay is based on a variety of factors such as the car’s list price, delivery, CO2 emissions and any options you add to the car that comes to over £100. Having an electric or hybrid car can bring this tax down.

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Business Car Insurance vs Company Car: A Comparison

If you are lucky enough to be given the choice between business car insurance or being given a company car, you should weigh up your options and take the positives and negatives of each into consideration. We’ve broken down how both operate under certain scenarios below.


As we’ve discussed, your company will provide you with extra money to cover business car insurance however you have to take care of repairs, MOTs and servicing yourself. On the flip side, with a company car the car is almost completely free (minus BiK). The company pays for the vehicle, the upkeep, fuel etc, saving you a lot of money and hassle.

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With business car insurance, you are free to customise and add different options to your vehicle. Having a company car means you may be limited in terms of the changes you can make to the vehicle – anything upwards of £100 will affect the amount you pay for BiK.


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Having your own vehicle

If you want full control over what vehicle you drive, business car insurance might be for you as you have chosen this yourself. With a company car you may be able to have a say in this or upgrade the model out of your own pocket, but most of the time the decision is made by your employer. Also, you should consider whether you actually want a new car – e.g. do you have the space to park it safely at home?

Guaranteed Asset Protection (GAP) insurance is also available to your employer on a company car. GAP insurance covers the gap between the amount owed on a car and the car’s actual value in the event of an accident. Find out more on our GAP insurance page – it’s worth asking if this is something your employer can offer you.


If you are going for business car insurance then you will have to spend the time researching different business insurance offers and organising this yourself. With a company car, you won’t need to face the hassle of organising and researching this as it is all done for you.

In conclusion…

If you have the choice between the two options from your employer, it’s ultimately down to you – you should weigh up the options and see which is a better fit for your needs.

If you’re an employer looking to insure a company car or multiple business vehicles, it’s important to understand how comprehensive your requirements are. You can benefit from using a fleet policy as overall your insurance can work out cheaper, which will mean you can then naturally create savings for employees. Fleet policies are very easy to manage and change should you need to.

At Fleetcover we take the time to thoroughly understand your needs which can help us determine the best policy for your business. Get in touch today for more information about fleet insurance.

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