Running a business means exposure to many potential risks, so knowing what business insurance is and how it will help your business is essential.
When people talk about insurance, they are commonly referring to commercial general liability insurance, a policy which covers the medical and legal fees associated with standard liability third-party claims resulting from your professional activities.
Some business owners believe that owning one type of insurance covers their entire business – bad idea.
What is Business Insurance in Canada?
Business Insurance is a policy package that protects Canadian business owners against common risks by ensuring the financial costs associated with a disaster, accident, or injury don’t shut down your business.
There are so many types of business insurance in Canada; what do I need?
With the countless options for insurance available to business owners in Canada, it can be overwhelming trying to determine what type of insurance your business needs.
Understandably, no one wants to be left exposed and no business owner wants to overextend themselves by paying too much in monthly premiums. That being said, business insurance is a fundamental piece of your business risk-management strategy. Even if you haven’t taken the time to explore all of your insurance options, don’t waste too much time stalling on business insurance.
Different companies sell their business insurance products under different names. There are also industry-specific examples of business insurance. Don’t get too hung up on the name. Instead, focus on reviewing what and how much your policy covers. A comprehensive business insurance policy is typically comprised of the following policies:
- Commercial General Liability Insurance (CGL): Commercial general liability insurance is a basic insurance policy that protects business owners against the typical risks they can expect to face when interacting with third-parties, such as bodily injury or property damage. Here are a few examples where owning a liability insurance policy could help your business:
- A client slips and breaks his arm during a site visit and decides to sue your company.
- You dent a homeowner’s front door while moving equipment for a renovation, and they demand compensation for the damage.
- An employee in your company makes a false claim about the competition, and they sue you for slander.
- Professional Liability Insurance: Professional liability insurance is not typically included in a general liability insurance policy, but is a necessity for those who make a living giving advice or providing services. Professional liability insurance protects against claims alleging negligence or failure to deliver a service as advertised. Some examples of what professional liability insurance covers:
- Mistakes or oversights: An accountant makes an honest mistake, costing his client millions of dollars.
- Subpar service: A consultant doesn’t deliver the service they promised as outlined in their contract, and a client wants to sue.
- Undelivered service: A contractor is unable to deliver on the promised service.
- Property Damage Liability: One of the most popular examples of business insurance is property damage liability insurance, which protects your business in case an employee accidentally damages a client’s property (e.g., during a plumbing job). Depending on the extent of the damage, the cost of paying back your customers might exceed the price of the work you’re doing in the first place.
- Product Liability Insurance: This type of insurance coverage protects business owners against claims alleging property damage or bodily injury due to an issue with the products you manufacture, supply, or sell. For instance, if you sell a camera and a defect in the camera causes it to explode in the owner’s hands, you’ll be very thankful that you have product liability insurance during what’s sure to be an expensive year of recalls and lawsuits.
- Commercial Property Insurance: Commercial Property Insurance provides coverage for loss or damage to the physical assets of your business, including your property, stock, furniture, and equipment. If you run your business from home, it is still important to purchase business insurance, as most home insurance policies don’t cover business-related loss or damages.
- Business Interruption Insurance: Should you need to put your business operations on hold due to damages resulting from an accident or disaster, business operation insurance will provide coverage for income lost during the time it takes to restore your business. In this context, income refers to salary, overhead costs, and the cost to repair your business.
I have a home-based business, do I need business insurance?
A small business owner working out of his home office will still need home based business insurance. It is important to consider the type of business you own and any risks associated with your operations. While business insurance covers the minimum costs, there are additional protection policies that your home business will benefit from.
Unsure whether your home-based business needs it? Consider the nature of your business. Do you distribute a physical product? There is the possibility that something could be wrong with the product or a component is recalled by the manufacturer, putting your business in jeopardy. In this case, you would want product liability insurance to protect your business against any lawsuits brought against your business.
If you sell a service and that service has enormous financial implications on a client (let’s say you offer accounting services or investment advice), you may want to look into a business insurance policy like professional liability insurance.
Does business insurance cover personal use?
Generally speaking, business insurance does not cover personal use, meaning you cannot replace home insurance with business insurance. However, there are exceptions. For example, if you operate your business from home, you can protect this space and with business property insurance. However, home insurance does not typically cover the physical assets associated with your business, such as stock or inventory, or liability issues that occur in your homes, such as a slip and fall injury.
Consider keeping business separate from your personal life by protecting your assets with a business insurance policy and home insurance policy. It can be confusing, which is why we recommend speaking with a broker to understand the limitations and restrictions of your business insurance policy.
How much is business insurance in Canada?
The cost of insurance for Canadian business owners depends on how much risk is involved in your line of work. For small- to medium-sized businesses, you can anticipate spending $450.00 annually on a basic CGL policy with a $2,000,000.00 limit.
When you fill out our online application, we will ask some questions about your business to help better understand your needs. Several factors are taken into consideration when determining the best policy options for you such as years of experience, annual revenue and industry.
Business Insurance Doesn’t Harm Your Business—It Helps It
Owning business insurance means that you’re taking the initiative and being proactive. The premiums that you pay are nothing compared to the time, resources, and money lost being reactive to a lawsuit brought to your business. In fact, not having any insurance at all may even deter other businesses from partnering or working with you.
Searching for the appropriate coverage options may feel daunting at first, but it’s important not to worry about what the insurance is called. Instead, focus on your business, its needs, and then understand what potential risks could arise to help you identify the right kind of protection necessary.
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