Although hire and reward insurance is often packaged into the cost of renting a commercial vehicle, such as a delivery van, it is not something that only self-employed, multi-drop delivery drivers who rent vans need. In fact, the term ‘hire and reward’ doesn’t relate to the hiring by the driver of a vehicle at all. In other words, it is something that both fleet managers and owner-drivers need if they gain a financial reward for the work they do from their vehicles. So, whether you own your own car, van or truck or rent one for doing deliveries – or other commercial work for that matter – it is highly likely that you will need hire and reward cover.
Please note that haulage companies, especially those that use HGV vehicles, are often outside of the remit of hire and reward insurance policies. This is because haulage freight insurance and truck HGV insurance usually deals with long-distance operators rather than, for example, motorbike dispatch riders, local removals firms and multi-drop delivery drivers. If you drive for a living and are unsure whether or not hire and reward insurance would be appropriate in your circumstance, then read on to find out everything you’ll need to know to ensure you have adequate coverage.
What Is Hire and Reward Insurance?
Firstly, hire and reward insurance is a financial product designed to reduce the financial risk of numerous ctypes of commercial drivers. However, it isn’t only this because it is also a legal requirement in many cases. You do not need hire and reward insurance if you are delivering items to friends and family or you are distributing goods free of charge for a charity, for example. However, as soon as you begin charging for your services as a driver – either directly or indirectly – then you are said to be hiring your services out for reward. Hence the need for hire and reward insurance designed for this purpose.
Consequently, you might be working in a sector that requires you to have this sort of commercial cover when you are on the road without even realising it. Indeed, if you are found to be without the right sort of insurance when working as a commercial driver, then you could face legal and financial penalties. Even worse, if you were to be involved in an accident while, for example, delivering goods for one of your customers, then you could face a significant financial loss on top of potential prosecution by the authorities.
To be clear, hire and reward insurance goes further than standard vehicle insurance. If you own a van, for example, but only drive it around for your personal use rather than hiring it – and your time – out for commercial gain, then you will still need standard vehicle insurance to be street legal. Typically, owners of vans and cars will find that third-party policies are the cheapest, especially those with higher excesses. Nevertheless, even if you were to opt for comprehensive insurance, this would be insufficient in terms of coverage for most commercial drivers. Why?
The reason you need something more than comprehensive insurance with allowed business use for commercial driving work is that the contents of your vehicle won’t be properly covered. For example, if you were driving a colleague to a trade show in another city, then the fair business use of your vehicle would cover them in the event of an accident and subsequent injury. Equally, if you were driving with a product sample in your boot which was damaged on the way to show it to a potential new customer, you would also probably be covered. However, in these two scenarios – despite the fact you were working – the driving you were doing would be regarded as secondary to your main line of work.
Compare that with a taxi driver, for instance, who is charging people to take them to a conference. He or she would not be covered if the passengers were to be injured while in transit even if they had comprehensive car insurance. There again, a courier driver who was involved in a crash might find that the contents of their van were written off due to the damage involved. Under such circumstances, comprehensive car insurance might cover damage to the other vehicles involved, depending on who was to blame for the accident, but it would not cover the losses caused to the van’s contents. You would need hire and reward insurance for that.
Who Needs Hire and Reward Insurance?
All sorts of people need hire and reward insurance. A chauffeur, a taxi driver or a multi-drop delivery driver would need this in order to be able to legally conduct their line of work, for example. People who do deliveries for takeaway establishments or who pick up shopping for their clients for a fee would also fall into this category. Equally, funeral directors who convey their clients to funeral homes and crematoria in limousines ought to have this sort of insurance.
Note that courier firms with motorcycle despatch riders who take items from one location to another for payment would need hire and reward coverage for their entire fleet. Equally, self-employed couriers who use their own vans to make deliveries for different last-mile delivery operators will need it. Crucially, this is the case whether they are contracted with one such firm or work for many on an ad hoc basis within the gig economy.
Can You Get Hire and Reward Car Insurance?
Yes, you can obtain hire and reward car insurance if you drive your own car as a registered taxi cab. The same would apply if you were to use your car to carry out deliveries as a courier. Typically, hire and reward insurance is worked out on the basis of the value of the vehicle – whether it is a van, a motorbike or a car – as well as its storage capacity. This is because insurers that offer this sort of policy will want to estimate the likely value of goods the car could have within it as well as the potential cost of writing off the vehicle. In fairness, some hire and reward van insurance will also cover car drivers but it is always worth checking with the insurer involved because some policies are for vans only.
Why Is Hire and Reward Insurance Needed for Food Delivery Services?
Even if you do not charge for your restaurant or takeaway service to undertake deliveries to customers within a certain radius of your establishment, for example, you will need hire and reward insurance to do this work. This is because even though you are not being directly rewarded for making a delivery, the drop-off will be considered to be part of the overall provision of food and service. In other words, you cannot get around the legal requirement to have this sort of insurance by simply stating that the delivery is being offered free of charge. You’d certainly need it if you were to apply a surcharge to orders that will be delivered rather than collected by customers, of course.
In addition, hire and reward insurance is needed by food distributors. If you run a wholesale firm, for example, that delivers foodstuffs to restaurants, shops and outlets, then you will need a hire and reward policy. Please bear in mind that the insurance industry tends to offer specific hire and reward products to food delivery firms that go beyond the standard ones that taxi firms and courier companies tend to have. The reason for this is the type of cargo that is being conveyed. Food, unlike other commodities that are transported around the UK, is often perishable.
Therefore, the commercial risks involved in it differ from other sorts of freight. It is worth seeking out a hire and reward policy for food delivery services if you deliver foodstuffs, even occasionally. Typically, tinned foods don’t require any additional cover but fresh food will often do, especially if it needs to be chilled in transit either from thermally sealed containers or from chiller units that are built into the structure of the delivery vehicle.
What Is Meant by Class 3 Insurance?
Class 3 insurance is the term the insurance sector uses to refer to commercial vehicle insurance whether it is for private hire or delivery activities, as outlined above. As previously mentioned, HGV drivers and haulage companies tend to be dealt with under different sorts of policies. Equally, most private cars and vans that are used for business but not on a reward basis – that is to say, they’re not being driven primarily for the purpose of making money – do not need class 3 insurance. To put that another way, for all intents and purposes class 3 vehicle insurance is hire and reward insurance and vice versa.
Therefore, if you are a taxi driver, a food delivery driver, a courier, a chauffeur or similar, you will be officially designated as a class 3 driver. Therefore, you will be legally obliged to take out class 3 insurance or your employer will on your behalf. The most commonly sold insurance products that allow class 3 drivers to go about their business is hire and reward insurance.
Please note that some people who drive very long distances for sales appointments may also be – for legal reasons – considered to be class 3 drivers. Even if they don’t take passengers or make deliveries, people who spend more time behind the wheel than doing other work, such as writing sales proposals or demonstrating products, may be obliged to take out hire and reward insurance for their job.
Does Courier Insurance Count as Hire and Reward Cover?
The best way to answer the question of whether a courier insurance policy would count as hire and reward insurance is to say yes and no. Firstly, these policies provide two different sorts of coverage. The important thing to note is that they sometimes overlap, however. What does this mean? To be clear, courier insurance sometimes has hire and reward cover built into it. Sometimes it does not. Check within the specific clauses of your courier insurance to see whether you could make a claim under hire and reward.
Of course, it is important to add that courier insurance isn’t needed by private hire firms, chauffeurs and taxi drivers, for example, because they primarily convey passengers, not goods. However, fleet courier insurance is recommended for courier companies. Indeed, self-employed delivery drivers of all kinds – those who drive cars, vans and motorbikes – are likely to benefit from this sort of insurance in the event of damage caused to goods.
It is worth noting that hire and reward insurance will cover losses that occur to goods in transit when they are in the vehicle that the policy is under. So, if your car were to be rear-ended and your packages in the boot were to be damaged, then your hire and reward policy should cover the financial loss involved. The same coverage should be expected under a hire and reward policy if someone were to steal your delivery van. Both the van itself plus your clients’ goods that were out for delivery at the time should be covered.
However, hire and reward insurance will not usually cover damaged goods that are harmed at other points within the delivery process. Let’s say, for instance, that a motorbike courier drops an item while handing it over to a goods-in department. Hire and reward insurance would be no good under this example because the accident occurred away from the vehicle. Equally, goods damaged when unloading them might not be covered by a hire and reward policy but they would be with specialist courier coverage. Therefore, couriers – as opposed to limousine drivers, for example – should consider the benefits of the wider level of coverage courier insurance affords over and above standard hire and reward policies.
Is Goods in Transit Insurance the Same as Hire and Reward Insurance?
No, it is not the same but it is related. In fact, courier insurance is a type of goods in transit insurance. Therefore, much of what has been outlined above in connection to courier insurance would also apply to goods in transit policies. The only difference to take notice of is that goods in transit insurance covers all sorts of deliveries, not only those made by courier firms.
Therefore, a general goods in transit policy – one that isn’t specifically marketed at couriers – would be worth looking into if your firm makes its own deliveries to customers. Some production facilities and factories that make or adapt products which they then deliver to clients in-house rather than with an external delivery firm may find goods in transit insurance to give them the full protection they need. This would be the case so long as the policy they choose includes the legal requirement for hire and reward cover.
How Much Is Hire and Reward Insurance Likely to Cost?
As you might expect, hire and reward insurance differs from insurer to insurer. Policies can be not much more than standard comprehensive vehicle insurance but this usually means that the excess level would be relatively high. Equally, some hire and reward cover is third-party only. This means that injuries caused to passengers and the general public might be covered in the event of an accident but that the driver him or herself would receive no payout in the event of an injury that might – feasibly, at least – mean they can no longer drive and earn an income from their line of work.
Factors that will affect the price of hire and reward insurance include the numbers of miles that you will expect to drive in the course of your work, the size and value of your vehicle and – in the case of couriers and courier firms – the type of deliveries that will typically be made. Expect to pay a bit more for hire and reward insurance if you tend to deliver jewellery, consumer electronics or haute couture fashion clothing for your clients as opposed to lower-value items, for example.
If you are a self-employed driver, then check whether any van you hire has hire and reward insurance built into the rental terms. This might only provide basic cover and you may wish to upgrade it but at least you will know that you are legal on the road when driving the hire van. Owner-drivers will need to take out their own hire and reward insurance, however. If you only do this work one or two days a week, then check out some of the flexible policies around for day usage. This can sometimes be more cost-effective than buying monthly or annual coverage. For full-time commercial delivery drivers, annual insurance is often the best way to go. Monthly direct debits are often a little more costly but they have the benefit of helping to split the cost of this operational overhead up.
Like all insurance policies, it is important to shop around, especially if your insurer plans to auto-renew your cover at the end of a 12-month period. Remember that you must have your hire and reward insurance reevaluated if you change the vehicle you are using for your work within the period of coverage you have taken out.
Hire and Reward Insurance in Summary
Hire and reward insurance is a legal necessity for all class 3 commercial drivers. That’s people and companies who drive for financial gain other than HGV drivers and haulage firms. Without it, you will be underinsured and could face legal consequences. Hire and reward insurance will typically cover:
– Taxi and private hire drivers.
– Couriers, whether they are self-employed or work for one firm exclusively.
– Funeral directors and food delivery drivers.
– Damage to the contents of vans, cars and motorbikes.
– Injuries caused to passengers while the vehicle is being used for work.
– Losses that occur from thefts from the vehicle or if the vehicle itself is stolen.