Can Business Insurance Be Transferred to a New Owner?

Did you know that there are nearly 35,000 new entrepreneurs in Canada every year? Canada is a place of progression and growth, and if you’re selling or transferring your business to one of those entrepreneurs, the question of insurance might come up.

But, can business insurance be transferred to a new owner? Or, do they need to start from the ground up? 

Whether you’re taking over a business or transferring your business, it’s essential to know the answer to those questions. Keep reading to learn more about the transfer of business insurance. 

Can Business Insurance Be Transferred to a New Owner? 

The not-so-quick answer to this question is, it depends. 

In many instances, the answer is yes, and it’s imperative to transfer the insurance so that coverage can continue. The last thing you want is for something to happen and not get covered because you didn’t take the proper steps to transfer business insurance. 

However, sometimes the answer to this question will be no. It’s crucial to read your policy and understand what it says. 

Many commercial insurance policies will contain wording that states the policy can’t get transferred to another person without the written consent of the insurance company. If this is the case, you can only continue the current owner’s policies with the permission of the insurance company. 

Reasons You Might Need to Transfer Business Ownership Insurance

There are a variety of reasons you might need to transfer business ownership insurance. It’s essential to hold your insurance policy until the business is transferred to maintain continuous coverage. 

If there is a gap, something could happen, and it wouldn’t get covered. Some scenarios where you might need to transfer insurance include:

  • Sale of the company
  • Death of the owner
  • Purchase of company name

If you are transferring your insurance policy, the new owner needs to pay any outstanding premium; however, it’s vital that you also consider retroactive coverage. 

What Is Retroactive Coverage? 

Who is responsible if someone sues your business for something that happened prior to the transfer of ownership? This is something that’s important to take into consideration when a company changes hands. 

Retroactive coverage helps address potential issues that could arise. However, there are generally two options: 

Original Owner Retains Responsibility

The business’s original owner can still take responsibility for incidents that occurred prior to selling the business. In this instance, it’s important that they have tail coverage or retroactive coverage. 

If the original owner passes away, their legal representative can purchase this coverage on their behalf. 

Liability Gets Passed to the New Owner

Responsibility can also get passed to the new owner. This means that they will be responsible for all claims. 

If this is the case, they need to carry continuous insurance coverage. The retroactive date needs to reflect that of the previous owner. This is another reason that transferring business insurance is essential. 

Know When to Purchase Tail Coverage

If you’re retaining responsibility for anything that happened prior to the change of ownership, it’s important to know when to purchase tail coverage. For many insurance companies, there is a time limit on when you can buy that coverage. 

Make sure that you discuss this with an agent. 

Know the Difference Between a Stock Acquisition or an Asset-Only Purchase

With a stock purchase, you buy the entire company as it’s currently structured. The company then continues to operate as it previously did. 

This means that you have also purchased any liabilities that the company might have with its assets. If someone makes a claim for something that happened prior to you buying the company, you’re still liable. 

With an asset-only purchase, you’re buying the physical assets of the company, which often includes their customer list. You will likely need to change the name of the company, but it doesn’t have to be an extreme change. 

For example, you could change the name from “Insurance Inc.” to “Insurance, LLC.” The difference here is that liability for things that happened prior to purchase remains with the original owner. 

What to Consider When Transferring Business Insurance

There are several factors you want to consider when transferring business insurance. This is a great time to review the policy and decide if the current coverage meets your standards. 

Type of Business

Not every business will need to transfer its policy. For example, if your business is small and home-based, you might need to. 

However, businesses that are bigger and have more employees and physical property will likely need to transfer their policy. 

Make sure to have these conversations with a professional when determining the right course of action for your business. 

Length of the Policy

What’s the length of your existing insurance policy? Many policies need to be renewed every year because they’re a one-year term. 

You might not need to transfer your policy if you’re near the end of your policy term. 


What kind of coverage do you have? If you have comprehensive commercial insurance, you will likely need to transfer it. 

However, it’s important to note that this is a good time for the new owner to review the policy as well. It’s possible that you will have different standards when it comes to insurance. 

You don’t want to assume that the previous owner had coverage at limits that you would find acceptable. If you want more insurance than the previous owner had, it’s important to update that during the transfer of insurance. 

For example, it’s possible the previous owner had only what’s required; if you want more coverage, you could consider adding key person insurance and other optional coverages. This will help ensure your business is protected no matter what happens. 


There are a lot of factors that play into cost when it comes to insurance. However, a small business will generally pay anywhere from 500 to 2,000 dollars a year for its policy. 

The costs can quickly add up, especially if you add extra coverage. However, you shouldn’t let the price deter you from making wise decisions about coverage. 

But, if you’re transferring your policy, it’s important that the new owner considers the cost. They need to be aware of how much they are going to pay and willing to pay the cost

How to Transfer Business Insurance

If you’re ready to transfer your business insurance, you need to contact your insurance company and discuss the change in ownership with them. It’s important to have the new owner’s information to give your insurance company when having this conversation. 

The next step will be for the new owner to apply for their own insurance policy. This process can feel complicated; however, contacting your insurance agent can help simplify things and give you peace of mind. 

What to Do If You Can’t Transfer Business Insurance

While business insurance does transfer, there might be some instances when it can’t. For example, the insurance company might decide they’re not comfortable underwriting the new owner. 

You have a few options if this occurs. 

Cancel the Policy

Your first option is to cancel your policy when the business changes hands. Remember, you don’t want to cancel before, and you might need to consider getting tail coverage. 

At this time, the new owner can apply for a new policy. If the new owner will be changing the business significantly, this might be the best option. 

However, it’s also important to note that every insurance policy has terms for cancellation. It’s important to talk to your insurance company about what those terms are. 

For example, they might require a certain amount of notice or that you fill out specific paperwork. In addition, keep in mind that cancelling and restarting insurance policies can increase your premiums, be sure you’re ready to cancel when you do. 

Add the New Owner

If your policy can’t get transferred, another option is to add the new owner to your current policy. If the new owner isn’t planning to make changes to the business, this is a good option. 

You would simply add them to your existing policy as an additional insured. 

Does Business Insurance Transfer? 

So, can business insurance be transferred to a new owner? In most instances, yes. 

However, there are a lot of factors you need to consider. It’s important to ensure that everyone is on the same page and work with your insurance agent.  

Are you looking for an insurance company for your business? Or ready to learn more about business insurance?

We’re committed to helping you find the right insurance solutions for your business. Contact us today by calling 647-966-7093 or emailing 

James Inwood is a member of Canadian Insurance Brokers Inc. CIBI operates across Canada with more than 40 licensed brokers and is completely independent so our advice is always objective. Representing 14 insurance carriers on the personal side and over 20 insurance providers on the commercial side helps give my clients clear choice and competitive pricing.

James Inwood, Insurance Broker
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