Types of Business Insurance Every Business Needs

Did you know that 25% of Canadian businesses are underinsured — or have no commercial coverage at all?

The reasons vary. Over 40% of business owners feel they don’t need coverage. Another 20% admit that they simply don’t understand what type of coverage they need.

Can you relate? After all, there are certain types of business insurance every business needs, but that doesn’t mean you know what your business needs.

The good news is that there are options for insurance to suit all types of businesses and budgets. As business insurance providers, we understand how frustrating it can be to determine what’s best for your company.

That’s why we’ve put together this comprehensive guide to commercial insurance for Canadian businesses. Keep reading below and we’ll take the mystery out of business insurance.

Why Small Businesses Need Insurance

If you’re just starting out or your company is very small, you may think that you don’t need business insurance. You might reason that the costs aren’t worth it or there’s not enough risk to merit paying insurance premiums.

In reality, though, every business is exposed to some type of risk.

A customer could injure themselves on your property or a fire could break out in your office. Thousands of cyberattacks target Canadian companies every day, which could lead to a breach of sensitive data. Or one of your clients could have an unfavourable outcome because of your product, service, or advice.

All it takes is one incident or one lawsuit to put your entire company at risk. Without the proper coverage, how will you protect yourself legally and financially if the unexpected happens?

Learn more about why every small business needs insurance.

How Does Business Insurance Work?

There’s no one type of “business insurance” that suits every company. Rather, it’s a collective set of coverages that protect your company where it’s most vulnerable. Your insurance broker will get to know the ins and outs of your company and recommend the specific types of coverage you need.

For example, if you produce the products that you sell, you might consider product liability insurance in case a customer gets sick or injured. If your employees deliver those products, you’ll need commercial auto insurance in case they’re involved in a traffic accident.

What if you run your business from home? Your homeowners’ policy covers less than you think. If your home office gets damaged by a flood or you’re the victim of theft, homeowners’ insurance won’t cover your business losses — but commercial insurance will.

Learn more about how business insurance works and how to determine what type of coverage you need.

How to Get Business Insurance

The process begins by understanding which types of insurance your business needs. Depending on your location, your industry, and your business lenders, you may be legally required to have certain policies in place.

If you have more than one employee, for example, you’re likely required to carry workers’ compensation coverage. If you store sensitive customer data (i.e., credit card information), you’ll need cyber insurance in the event of a data breach.

As we mentioned at the outset, it’s virtually impossible to know what’s required or recommended without professional guidance. To ensure you have the protection you need, it’s best to speak with an experienced insurance business insurance provider. They can analyze your business operations and risks and then provide a custom quote with the coverage you need.

Learn more about how to get business insurance — it’s easier than you think.

When to Get Business Insurance

The short answer is: As soon as possible. 

A new startup is just as likely to face a lawsuit, a security breach, or another disaster as a company that’s been in business for decades. Liability is there from the moment you launch your company, so it’s best to have coverage in place from the start.

As your business evolves, you’ll also need to reassess your insurance needs. For example, are you expanding to a new location or opening an online store? Are you purchasing new equipment or launching a new product? Did your employee payroll grow from two to 20 people?

Learn more about the best time to purchase or upgrade your business insurance.

What Insurance Does a Business Need by Law?

The answer varies from province to province, and each city may also have its own regulations to consider.

As an example, Ontario or city by-laws can require certain business classes to carry general liability insurance. Most policies begin with $1 million in coverage to protect your company in the event of a lawsuit. You’ll also need commercial auto insurance if you use a vehicle for your business.

Depending on the size and nature of your business, you may also be required to carry Workplace Safety and Insurance Board (WSIB) insurance. Other mandatory policies might include product liability or professional liability insurance.

Learn more about the legally required options for insurance in Ontario.

Can Business Insurance Be Written Off?

Ah, everyone’s favourite topic — taxes.

As a business owner, your goal is to minimize expenses and maximize profits. Tax deductions are a key way to accomplish that, and the good news is that certain types of business expenses (including insurance) can be deducted.

In general, you can deduct the following premiums:

  • General business liability insurance
  • Property insurance
  • Business interruption
  • Cyber risk insurance
  • Professional liability
  • Product liability
  • Contractor coverage
  • Commercial car insurance

Of course, things aren’t always black and white. If you’re a sole proprietor running your business from home, or you employ a team of remote workers, things can get a little tricky when it comes to taxes.

Learn more about which types of business insurance you can (and cannot) write off.

Can Business Insurance Be Transferred to a New Owner?

The short answer is: It depends.

There are many reasons why you may need to transfer business ownership insurance. Some of the most common scenarios include the sale of the business or the death of the company owner.

In some cases, it’s a relatively easy process to transfer the insurance policy and maintain continuous coverage. In other cases, the insurance terms and conditions don’t allow a transfer and the new owner must purchase a new policy.

What about retroactive coverage or tail coverage to provide protection against claims for something that happened prior to the transfer of ownership? What other options do you have if this doesn’t apply and the new owner needs their own insurance policies?

Learn more about when and how to transfer business insurance.

5 Types of Business Insurance Every Business Needs

So then, what types of business insurance does your company need?

The answer will vary, but let’s briefly consider the five most common types of coverage for Canadian business owners.

  1. General Liability: Covers liability in lawsuits and protects against customer injuries, property damage, or defamation 
  2. Commercial Property Insurance: Covers your business structure and property and pays to repair or replace damaged property, equipment, and inventory
  3. Business Owner’s Policy: Combines general liability insurance with commercial property insurance for a lower “bundled” cost
  4. Cyber Liability Insurance: Covers the cost of data loss, a data breach, and lawsuits that come from a data breach
  5. Workers’ Compensation Insurance: Covers your employees’ medical expenses if they get injured on the job, as well as lost wages and employee lawsuits

These are the most common types of business insurance every business needs, but there may be others that are relevant to your business.

If you’re an accountant, for example, you’ll need professional liability coverage if one of your clients suffers financial harm as a result of your advice. If your area is prone to natural disasters, you may need business interruption coverage. This will protect you financially if you need to close your business following a flood, fire, or storm.

An experienced insurance broker will consider the unique needs of your business and provide a custom quote with the best coverage options.

Options for Insurance: Find a Trusted Business Insurance Provider

As a small business owner, you can’t afford to take risks with your company. As we discussed above, there are affordable, comprehensive options for insurance to suit all types of businesses.

Understandably, it can be a nightmare to read the small print on insurance terms and conditions. Even comparing insurance costs can be confusing as you try to understand what’s included (and what’s not).

It’s true that there are certain types of business insurance every business needs. But what about your business, in particular? How can you ensure you have the coverage you need without paying for options you don’t need?

This is where we come in. For more than 10 years, James Inwood has helped Canadian business owners get the coverage they need at premiums they can afford.

Our goal is to offer objective advice that suits your needs and works in your favour. Email us at: jinwood@cibi.ca or use our contact form to learn more about which options are best for your business.

If you prefer, you can also give us a call or send us a WhatsApp message at 647-966-7093. We look forward to helping you with your business insurance needs!

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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