Small Business Tips

What Types of Insurance Are Available to Protect My Small Business?

Victoria Morrison

As a business owner, you need to be aware of the many different types of insurance available to protect your business, your staff, your family and your income. Insurance needs vary tremendously based on the nature of the business and how many people work for you. Canadians are considered by many observers to be underinsured and unprepared for a personal financial crisis, and this goes for small businesses too.

Is small business insurance required in Canada?

The answer is "it depends". It really depends on your business activities and the type of insurance. Insurance for small businesses covers a vast array of needs. Some of which are personal and discretionary, such as life insurance to protect your family.  In some cases, insurance will be required and mandatory, either by contract or by law. Many large corporations require suppliers to have insurance for professional errors and omissions. In other cases, your landlord may require proof of insurance when you sign a lease.  Finally, you may also be required by law to have insurance coverage. As an example, you operate a school bus service. The best approach is to discuss your business and personal situation with an insurance broker. More on that below.

Common types of insurance coverage

Let's look at some of the most common types of coverage available to business owners:

     
  • Life and critical illness insurance provide long-term financial security for your family if you suffer a serious or fatal illness or event.
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  • Disability and accident coverage will provide regular income if you can't work due to illness, injury or disability.
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  • Business property and contents insurance protect your business's buildings and offices, and what's inside them, in case of theft or damage.
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  • General liability insurance covers anyone who is harmed at your business premises.
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  • Professional liability insurance covers errors and omissions. More and more businesses are required to have this coverage to be considered for contracts.
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  • Product liability coverage protects your business if the products you offer cause injury or harm.
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  • Group health and dental coverage offered as an incentive to employees. Group plans can be created for a small number of employees.
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  • Other types of insurance coverage are required or recommended, such as company vehicle insurance, coverage for key persons (for principal business owners who operate the business) or liability for data breaches or business interruptions.

What insurance do I need for small business?

There's no one-size-fits-all approach. Your personal situation and business activities will determine your needs. Life and business insurance advisors and brokers can help you figure out the coverage and insurance amounts you need.

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Where to get insurance for small business?

Business insurance is available through commercial insurance brokers. For information and advice, go to the Insurance Bureau of Canada.  Group health plans are offered directly by insurance companies or through group benefits brokers.  

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Different types of business insurance for small business owners

Here are a few scenarios and recommendations for insurance coverage for different types of small businesses:

     
  • Freelancer working from home: If you work from home as a graphic designer, mostly for agencies, you may still want to consider home business insurance, which typically covers business property, business interruption and legal liability, even if no clients visit you. Check if your home insurance provider offers business-related coverage as an add-on, or if your home insurance covers your office equipment. Compare costs with a commercial insurance broker.
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  • Consulting services firm, with two partners: You and your business partner own a structural engineering and environmental consulting firm that employs nine employees and has two small offices and two company trucks. Your business may need general and professional liability, property, contents and vehicle coverage, partnership and business interruption coverage, a company health insurance plan, and possibly other types of coverage.
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  • Coffee shop owner: You operate a small premium coffee house in town in a rented street-level shop at a busy waterfront location, and you bike to work. You should consider liability, property and contents and business interruption coverage. Since your employees are part-time students, you don't need a group health plan.

Small business insurance protection - safeguard a better future

Most salaried employees have group health insurance and basic life and disability insurance. As a small business owner, you may have none of the above.  But What happens if you stop working because of illness or disability, and you have no insurance protection to replace income and maintain your business? The financial impact could be devastating for your family, and the company might have to cease operations.  Every business owner should have personal life, disability, critical illness and health insurance coverage (unless they are covered under their spouse's plan) if their business has no group health insurance.  Having health insurance in place is critical, especially if you have children at home, or if your partner does not have any income or health insurance through work. Ask friends and family to recommend a few insurance advisors you can contact for advice on coverage and cost estimates.