How Salary Sacrifice Car Insurance Works
If your employer offers a salary sacrifice car scheme and you decide to take advantage of it, you can bundle costs like car insurance, maintenance, and breakdown cover into your monthly car payment. This allows you to benefit from salary sacrifice tax savings on all the additional expenses that come with leasing a car, making it more affordable.
In this blog, we will explore how pre-tax salary sacrifice car insurance works, its benefits, what’s covered, eligibility, and more.
The Benefits That Come With Salary Sacrifice Car Insurance
Since premiums are deducted from the employee's salary, several benefits come with including car insurance in the monthly salary sacrifice payments. These include:
Reduced taxable income - National Insurance and Income tax savings are applied to the car insurance costs which makes this more tax-efficient
Easier budgeting - The cost is fixed monthly, meaning that even if the driver’s circumstances change, the price won’t increase with inflation in the long term..
One bundled monthly price - It simplifies the process because you’re able to consolidate all car costs into one payment.
Features Of Comprehensive Car Insurance
Comprehensive car insurance provides the most complete coverage, ensuring you’re insured in the event of an accident, even if it’s your fault. This differs from third-party insurance, which only covers damage you cause to others. The cost of comprehensive coverage varies based on factors such as age, vehicle type, location, and driving history, all of which can influence the price.
What Does Salary Sacrifice Car Insurance Cover?
At The Electric Car Scheme, we offer optional comprehensive car insurance cover as an ‘add-on’ to our scheme. Car insurance policies vary in terms of what they offer as standard.
Generally, here’s what salary sacrifice car insurance covers:
Accidental damage - covering damage to your car or another car in an accident,
Personal injury - covers the driver, passengers and other people involved in an accident,
Property damage - covers damage to other people’s property in the event of an accident,
Stolen or damaged belongings - covers replacing or repairing personal belongings that are damaged or stolen from your car,
Windscreen repair - covers the cost of repairing your windscreen,
Fire and theft - damage caused by fire, theft or vandalism,
Medical expenses - covers medical expenses for the driver, passengers and others involved in an accident.
Other comprehensive insurance policies will also cover (but are not limited to):
Accidental transport/vehicle recovery,
Child car seats cover up to a certain amount,
Unlimited cover for audio and navigation equipment that is permanently fixed to the vehicle,
Replacement locks.
What’s Not Covered By The Insurance?
While comprehensive car insurance policies provide the highest level of coverage, there are certain situations where coverage may not apply. Examples where you will not be covered include:
Accidents caused when driving under the influence of drugs or alcohol,
Theft as a result of carelessness, like leaving your car unlocked,
General wear and tear like worn tyres or brake pads.
Important Considerations
Before adding insurance to your salary sacrifice car scheme agreement, there are several important factors to consider, such as driver responsibilities, eligibility requirements, and more. Let’s get into the details:
Driver Responsibilities
It is the driver’s responsibility to keep the car well-maintained throughout the lease duration.
Eligibility Requirements
To qualify for comprehensive car insurance, you must meet specific eligibility requirements. Keep in mind that this criteria may vary between salary sacrifice car schemes - the following is based on the criteria used by The Electric Car Scheme.
You must be a permanent UK resident,
≤1 at-fault claim within 3 years,
No unspent non-motoring convictions,
No category A convictions within the last 3 years,
No conviction that has resulted in a ban for the last 5 years,
No emergency services staff,
No celebrities or sports people.
No Claims Bonus Protection
If you haven’t had a recent claim, drivers will get a no-claims bonus on your car insurance when you come to renew. The longer you drive without a claim, the larger the discount on your premium will be - saving you even more money. This will be applied when you add car insurance to your salary sacrifice scheme.
Courtesy Car Provision
If your lease car requires repairs after an accident, a courtesy car will be provided for the duration of the repairs. In the event your vehicle is stolen and not recovered, a courtesy car will be available for up to 14 days or until a settlement offer is agreed, whichever comes first.
Please note that a courtesy car will only be provided once your claim has been accepted and the cover has been confirmed.
You will be responsible for the following costs when you have a courtesy car:
Cost of fuel,
Collection and delivery charges (if they apply),
Any charges for fitting accessories,
Any excess which would have applied to your vehicle which is temporarily replaced.
Accident Procedures
Immediately after an accident, loss, or any damage, the driver or their representative must contact the insurance provider by phone. Any further communication regarding the incident should also be forwarded to them. The insurance company will then assess the damage, review the claim, and proceed according to the insurance terms and conditions.
Fleet Insurance: How Does It Work?
Employers and employees can benefit from adding comprehensive car insurance to salary sacrifice schemes. Comprehensive fleet insurance policies protect a business’s fleet of vehicles under a single policy - this covers risks like accidents, theft and damage. Policies can be tailored to meet a business’s needs and are usually a more cost-effective way of insuring vehicles.
Instead of managing multiple policies, businesses can consolidate all of their insurance needs on one policy. Fleet insurance can be customised to provide the coverage that best suits a business’s needs. All vehicles covered under a single policy have the same renewal date.
When considering fleet insurance, there are important factors to include, such as:
The level of experience of the drivers,
How often do the vehicles need to be on the road,
How dangerous goods are being transported.
Can a Fleet Insurance Policy Be Used For Salary Sacrifice?
Yes, a fleet insurance policy can be used for salary sacrifice schemes. Since the business is the registered owner of the vehicle, the two can work in conjunction with one another.
With The Electric Car Scheme, you are able to bundle car insurance, breakdown, tyres and even a home charger into the cost of your monthly salary sacrifice payments. This means drivers can save on National Insurance and income tax contributions because the payment is taken from the employee’s salary before tax. If you’re interested in learning more about electric car salary sacrifice and how it works at The Electric Car Scheme for both employees and employers.
