10 Costly Myths About Liability Insurance Canadian Small Businesses Must Know

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We asked these business owners why they had no coverage. Among the reasons they gave were:

• 39.9% said they don’t think they need it
• 25.4% said insurance is too expensive
• 8% haven’t thought about it
• 7.3% said they have no liability risks whatsoever
• 5.8% said they’re covered by homeowner or private-passenger car insurance
• 4.4% said it’s too complicated to get business insurance

These are dangerous misconceptions that could cost these business owners a significant amount of money if they’re sued, experience unexpected damage and loss (like a fire or theft), make a mistake in their work, or have an accident.

Below are 10 of the most common myths or opinions about business liability insurance in Canada that some small business owners may have. 

We explain why these are dangerous misconceptions, and why any naysayers should think twice and explore their coverage options:

Myth No. 1: “My Business Is Too Small to Need Insurance”

False. Accidents or unexpected incidents that cause injuries or property damage can happen to any small business owner, including independent professionals, sole proprietors, freelancers, side hustlers, and micro-business owners.

Example: Our client, a renovation contractor, was removing drywall at their customer’s property when they accidentally ruptured a water pipe inside the wall. The burst pipe caused over $30,000 in damage to the building. Their general liability insurance covered the claim.

Myth No. 2: “I Run a Home-Based Business, So I’m Covered By Home Insurance”

No, not entirely. Some homeowner insurance policies may provide minimal liability coverage, but many do not, as homeowner insurance is not designed to cover commercial operations and their liability risks.

There are times where a small at home business can be covered through a home insurance policy, but there still may be coverage gaps depending on what the home insurance provider offers. However, there are many reasons why you should insure your home business with commercial insurance.

In some cases, if a home insurance provider learns of a homeowner running a small business out of their home that they weren’t aware of, they could cancel your home insurance coverage. Getting insured again could prove to be difficult and much more expensive if an insurer cancels or terminates your coverage.

Myth No. 3: “General Liability Insurance Covers Everything”

False. Don’t get us wrong, general liability insurance is vital coverage for any business owner. It covers third-party bodily injuries or property damage that happens on your business premises or that occurs elsewhere as a result of your operations.

General liability insurance in Canada is essential, but it doesn’t cover everything a small business may face. For instance, if your workplace or shop caught on fire and burnt to the ground, general liability insurance wouldn’t cover any part of that, whereas a commercial property insurance policy would. 

Example: One of our contractor clients had his tools stored in a secured trailer at a jobsite overnight. Thieves broke into it and stole all of his tools. It was his portable tools and equipment insurance that covered over $13,000 to replace them.

Myth No. 4: “Insurance Companies Don’t Pay Out Claims”

False. We get it – the only time you ever hear about insurance on the news typically is when someone had their claim denied by their insurer, and there’s an uproar about it (whether that decision was justified or not).

While it’s true there are reasons a business insurance claim can be denied, ask yourself, when was the last time you read or heard a news story that featured an expensive insurance claim being paid?

We can give you another example that show claims often do get paid, like this one: one of our clients owns a spa, and they were ordered to evacuate their community by the authorities because of an approaching wildfire.

When they were allowed to return, they discovered their spa was severely damaged by smoke and fire. Their commercial property insurance covered over $150,000 to repair the property and cover their lost revenue while repairs were underway.

Myth No. 5: “Only Big Companies Get Sued”

False. Any business owner or self-employed professional could be sued by a customer, supplier, or partner alleging they suffered financial harm because of your negligence, inaction, substandard work, or poor advice.

Consider this – a Zensurance survey of Canadian consumers found an overwhelming majority (96%) of consumers would sue a small business owner or independent professional if they felt they had been wronged.

Example: One of our contractor clients made an error while providing underground utility locate services to their customer. They missed identifying an underground pipe that was subsequently damaged during an excavation project. The customer sued our client. Their professional liability insurance covered over $50,000 to repair the damaged pipe and cover our client’s legal expenses.

Myth No. 6: “Business Insurance Costs Too Much”

Business insurance policies vary in price and coverage options, depending on the nature of your business, where it’s located, the goods and services you provide, and other factors insurance companies take into consideration when pricing a policy.

That’s why shopping around annually and reviewing your policy before renewing it is highly recommended.

As your small business evolves, your insurance policy should adapt to its changing needs. A Zensurance broker can help you assess your current coverage, ensuring it remains adequate. We’ll also shop for insurance on your behalf, finding the necessary protection at a competitive price.

Regardless, compared to the cost of what a claim brought against your business might cost, or if unexpected events result in expensive damages to your business property or operations, the price of an annual insurance policy is far less than what you’d have to pay in such a scenario.

Example: One of our clients was a victim of a ransomware attack that resulted in their data being stolen and their computing systems being locked unless a high ransom was paid to the cybercriminal (even if you were to pay the ransom, there are no guarantees the unknown hacker will release your data).

Our client’s cyber liability insurance policy covered over $200,000 to pay for repairs to their computing system, conduct a forensic investigation to determine how it happened, and cover their legal expenses.

Myth No. 7: “My Business Has No Liability Risks”

False. Every small business, micro-business, entrepreneur, or independent professional has liability risks that could bankrupt them.

No matter how cautious or meticulous you are, accidents and unexpected events can happen to any business owner without warning.

Example: One of our clients is a landscaping professional who was working on a customer’s property. A passerby happened to trip over one of our client’s tools, fell, was injured and required medical assistance. The injured person sued our client.

Our landscaping client’s general liability insurance covered over $8,000 of the injured person’s medical expenses, and paid out over $10,000 to cover our client’s legal fees.

Myth No. 8: “My Business Has No Cybersecurity Risks”

False. Every online business, or any business or independent professional using technology for their livelihood (email, a website, social media, software, point-of-sale systems) is at risk of suffering a cyber-attack or data breach.

A poll of small business owners conducted by the Insurance Bureau of Canada found that 69% don’t consider cybersecurity a financial priority, and only 20% intended to purchase a cyber insurance policy, believing they’re too small to be targeted. 

Example: One of our clients’ social media accounts was hacked. The fraudster used our client’s customers’ credit card information stored in the account to share thousands of malicious ads through their social account that linked back to a fraudulent website.

Our client’s cyber liability insurance policy covered reimbursement of over $10,000 stolen from the customers’ credit cards.

Myth No. 9: “Only Business Owners Who Are Bad at Math Need Insurance”

False. With the exception of accountants, bookkeepers, and finance professionals, most of us are not math wizards – and accountants, bookkeepers, and finance professionals are required to be insured.

While balancing the books and managing money wisely is incumbent on every business owner, if something unexpected or unusual happens that incurs tens of thousands of dollars in losses, your savings are unlikely to cover the loss comfortably.

Example: One of our therapist clients unexpectedly had a complaint filed against them with their professional college. An investigation ensued, and our client needed legal representation.

They had legal expense insurance as part of their professional liability insurance policy. It covered over $10,000 of their legal expenses to deal with the proceedings against them.

Myth No. 10: “Getting Business Insurance Is Too Complicated”

There was a time when getting small business insurance was a long, complicated process, indeed. But not anymore – not since 2016, when Zensurance launched to become Canada’s first and now leading online small business insurance provider.

Through our website, a business owner can complete our online application in about five minutes to get a free insurance quote.

In many cases, that quote from one of over 50 insurers in our partner network is generated instantly. In other cases, our team of knowledgeable brokers shop our partner network to get the right coverage at the best price available for any company, and provides a business owner a quote in 24 hours or less.

We’re delighted to note that many of our valued clients share their experiences with us on social media and through Google Reviews and TrustPilot.

Example: This is a post we spotted on social media by one of our beautician clients, illustrating that it’s not complicated to get the coverage you need for your business.

Your Small Business Needs Insurance: Zensurance Can Get You a Low-Cost Policy Easily

Business insurance is a critical part of every small business owner’s financial well-being and security. Don’t expose yourself to unnecessary risks that could shutter your business and bankrupt you overnight.

Complete our online application now for a free quote.

Our team of licensed brokers consists of insurance experts who can help you secure the right policy for your business and budget. They will advise you on essential coverages and limits, customize the policy to your specifications, and provide your policy documents and certificate of insurance in 48 hours or less.

Protect your livelihood today. Get a free business liability insurance quote in minutes and see how affordable peace of mind can be.

– Reviewed by Brandon Bowie, Senior Broker and Team Lead, Professional Lines, and Reagan Elly, Senior Claims Advisor, Zensurance.