Courier

Hire and reward insurance explained: is parcel delivery covered?

Standard van insurance doesn't cover being paid to carry other people's parcels. Here's what hire and reward means and how courier cover differs.

Normal van insurance doesn't cover parcel delivery because being paid to carry other people's goods is "hire and reward" work, and standard private and business van policies exclude it. To deliver parcels for money, the van has to be insured for that use, which usually means a courier or hire and reward policy.

That sounds like a technicality, but it decides whether you are insured at all while you are working. Here's what the term means, why it matters, and what to look for.

What does hire and reward mean in van insurance?

Hire and reward is insurance shorthand for carrying goods (or people) in return for payment, where the goods belong to someone else. A parcel courier is the textbook case: the parcels aren't yours, and you are paid to move them from A to B.

It doesn't matter how the payment arrives. A per-drop rate from a delivery app, a day rate from a courier firm or cash from a local shop all count. Policy wordings draw the line in the same place. In one Financial Ombudsman Service decision, the van's certificate allowed use "for the policyholder's business for the carriage of own goods" but excluded "conveyance of passengers or goods for hire and reward".

The government uses the same idea for goods vehicle licensing. The operator licensing guide separates carrying "your own goods" from carrying "other people's goods for hire or reward", and treats them as different kinds of operation.

Why doesn't my normal van insurance cover parcel delivery?

Van policies are sold by "class of use", and each class describes what the van is allowed to be used for. The common ones look like this:

The middle row is where many people get caught out. Carriage of own goods is a business class, so it feels as though it should cover any work. It doesn't. A plumber carrying their own pipes and tools is carrying their own goods. A courier carrying a stranger's parcel is carrying someone else's goods for a fee. If you want the detail on the lower classes, see our guide to social, domestic and pleasure vs carriage of own goods.

Is it illegal to deliver parcels without hire and reward cover?

It can be. The legal question isn't simply "do I have a policy?" but "does my policy cover what I'm doing right now?".

Section 143 of the Road Traffic Act 1988 makes it an offence to use a motor vehicle on a road or other public place unless there is a policy in force in relation to that use. GOV.UK says third party cover is the legal minimum for driving on UK roads. If your policy excludes hire and reward and you are out delivering parcels for money, you may not have valid cover for that journey, even though the van shows as insured.

GOV.UK sets out the penalties for being caught driving a vehicle you're not insured to drive:

• a fixed penalty of £300 and 6 penalty points from the police
• if the case goes to court, an unlimited fine and possible disqualification
• the police can seize, and in some cases destroy, the vehicle

The offence carries the endorsement code IN10, which GOV.UK lists as 6 to 8 penalty points that stay on your driving record for 4 years from the date of the offence.

What about checking the database?

askMID lets you check for free whether your own vehicle is on the Motor Insurance Database. That is useful, but it only tells you a policy exists. It won't tell you whether the policy's class of use covers courier work, so the policy schedule and certificate are what to read for that.

What happens if I have an accident while delivering on the wrong policy?

This is the part that tends to cost the most. If you crash while doing paid deliveries on a policy that excludes hire and reward, the insurer can look at what the van was being used for at the time. In one Financial Ombudsman Service case, a driver insured for social, domestic, pleasure and commuting use hadn't told the insurer about delivery driving. The ombudsman accepted the insurer wouldn't have offered cover at all and was entitled to decline the claim, even though the claim had nothing to do with deliveries. It isn't automatic either way: in the van case above, the ombudsman decided a shopkeeper delivering the business's own stock was within carriage of own goods cover, and told the insurer to reconsider the claim.

There is also the question of what you told the insurer when you took the policy out. For policies taken out as a consumer (mainly for personal rather than business purposes), under the Consumer Insurance (Disclosure and Representations) Act 2012, "it is the duty of the consumer to take reasonable care not to make a misrepresentation to the insurer". If you answered the van's use questions wrongly, Schedule 1 of the Act sets out what the insurer can do:

1. Deliberate or reckless misrepresentation: the insurer can treat the policy as if it never existed, refuse all claims and keep the premiums unless it would be unfair to do so.
2. Careless misrepresentation, where the insurer wouldn't have offered cover at all: it can cancel the policy from the start and refuse claims, but must return the premiums.
3. Careless misrepresentation, where it would have charged more: it can cut any claim payment in proportion to the premium you should have paid.

People injured by drivers without valid cover aren't left with nothing: the Motor Insurers' Bureau helps victims of uninsured and hit-and-run drivers. That protects the other party, not you, and it doesn't change the offence of driving without valid cover.

What does courier insurance actually cover?

Courier insurance is van insurance with hire and reward included, usually built for drivers making lots of local drops. Long-distance, single-destination loads tend to fall under haulage cover instead. Whatever the policy is called, the class of use in the wording is what counts.

As with any van policy, you'll usually choose a level of cover: third party only, third party fire and theft, or comprehensive.

Is the parcel covered too?

Not usually by the van policy itself. UK law treats them as different kinds of insurance: the Regulated Activities Order lists cover for loss of or damage to "vehicles used on land, including motor vehicles" as one class, and cover for "merchandise, baggage and all other goods in transit" as another. Loss, theft or damage to the parcels is normally covered by goods in transit insurance, which many providers offer as an add-on. These policies often have limits per item and per load, and some goods (such as high-value electronics or jewellery) may need specialist cover.

Some couriers also look at public liability insurance, which deals with claims that you injured someone or damaged their property while working, for example tripping a customer on a doorstep with a trolley.

How do I get the right cover for parcel delivery?

When you compare courier insurance quotes, the answers you give about the work shape the cover you're offered. A few things to have ready and check:

1. Describe the work accurately. Say you deliver parcels for payment, roughly how many drops a day, and whether it's full-time, part-time or occasional.
2. Give the area you work in. Some insurers ask for the radius or region you deliver in.
3. Check the class of use on the schedule. It should say hire and reward, courier or multi-drop, not just "business use" or "carriage of own goods".
4. Check who is covered to drive. If anyone else will drive the van for deliveries, they need to be named or covered under the policy terms.
5. Look at goods in transit separately. Check whether it's included, its limits per parcel and per load, and any excluded items.
6. Check what your delivery platform or contractor asks for. They can set their own insurance requirements, such as proof of hire and reward cover or minimum levels of goods in transit or public liability.
7. Tell your insurer about changes. If you start delivering on a van that's currently insured for personal or own-goods use, contact them before your first paid drop, not after.

Kompare passes your details to specialist UK brokers who arrange this kind of cover, so you can see prices and policy details side by side.

Does van weight or driving abroad change anything?

For most parcel couriers in standard vans, operator licensing doesn't come into it. GOV.UK says you need a goods vehicle operator's licence for a vehicle with a gross plated weight over 3,500kg (or, with no plated weight, an unladen weight over 1,525kg). There's one exception worth knowing about: if you carry other people's goods for hire or reward in the EU, Iceland, Liechtenstein, Norway or Switzerland in a van with a maximum authorised mass over 2,500kg, you need a standard international licence. Rules differ in Northern Ireland.

If you cross into Europe, check the van policy's territorial limits too, as well as the class of use.