Are you a Canadian small business owner? Ever wondered, What types of Small Business Insurance you need in Canada? What does business insurance cover? How much does business insurance cost? Let’s dig into the answers to all these queries.
Small Business Insurance – Do you need it?
Every business big or small faces challenges and threats. Financial protection in the form of small business insurance is one of the keys to overcome such challenges. According to the Insurance Bureau of Canada, “a major loss to one organization may be a trivial loss to another.”
Most of these businesses do not even think about taking an insurance policy. But this is where they make a big mistake. Irrespective of the size, a business must take it. If we look at the stats, there are over 1200 small businesses that are on the verge of bankruptcy and other risks.
In Canada, entrepreneurs have so many choices for insurance policies. The only issue is that you won’t find a single policy that covers all aspects of damage. Just ask yourself some basic questions like:
- Which kind of policy will be suitable for your business?
- Where to take the policy from and when?
- Is the policy cover sufficient for you?
Canadian business owners should match the risks and type of coverage with the various insurance policies available. This is crucial for the long-term survival of your business.
You all must have seen various advertisements that show the dangers of not taking coverage. But you shouldn’t blindly accept any policy you come across. Evaluate the size of your business and your budget. That’s why here we have listed some very specific small business insurance policies that will be useful to you.
You may also like to learn How to Start a Real Estate Business with Zero Investment in Canada?
Types of Small Business Insurance in Canada
Different insurance providers try to offer the options with most coverage to appeal the business owners. But being a small business owner you must consider only the essential covers and forego others. More choices often confuse the new and small businesses. Let us dive into the types now.
1. Commercial General Liability Insurance
Commercial General Liability Insurance or CGL Insurance is designed to cover all the lawsuits that a small business might face due to third parties. It also provides coverage for property damage due to negligence. CGL insurance will pay you for all the litigation fees, out of the court settlements if any.
It offers the following coverages- bodily injury liability, property damage liability, product liability, tenant’s liability as well as personal injury liability. Small business owners cannot afford property damage. It creates quite a big liability for them. Taking a general liability insurance policy is the best option for them.
2. Professional Liability Insurance
Professional Liability Insurance is popularly known as E&O insurance. The policy is to protect you from your client’s financial claims. Such claims might arise due to error or misappropriation in services offered.
Sometimes the errors are unintentional. In such cases, it is not right to bear the financial losses. Hence Professional Liability Insurance covers lawsuits that might arise due to:
- Negligence
- Bad Advice
- Misconduct
- Failing to fulfill the orders before the deadlines
- Goods and Services not being as specified
Small businesses in advisory domain and consultancy can benefit from it. Professionals like doctors and lawyers can also invest in such a policy.
3. Product Liability Insurance
Have you ever thought that a product can cause bodily harm or property damage? If not, then Product Liability Insurance is a policy made to cover such incidents.
Many times it happens due to incorrect information on the labels or manufacturing defects. For all such damages, it is beneficial that a small business opts for Product Liability Insurance.
Keep in mind that services are not a part of it. Most of the time it is taken as a part of the CGL insurance. If you have a small food chain or an online cloud kitchen in Canada, then you can take a lot of benefits from such an insurance policy.
4. Commercial Property Insurance
Imagine if the business property you took on rent got flooded because your water pipes were damaged and needed plumbing. Will the landlord spare you from the repair costs? Such damage will destroy all your machines, electronics, and even your inventory. What can you do?
For such issues, Commercial Property Insurance offers coverage against any kind of property damage including vandalism and theft. So, whether you have a commercial space, leased building, off-site business, or even inventory piled up in a warehouse. The insurance will cover the damage to each one.
Do not worry because all your portables, electronics, repair costs, furniture, fixtures, and everything will be included in it. So, whether it is stolen or damaged due to natural causes, you will get the insurance cover for it.
5. Commercial Vehicle Insurance
The next small business insurance on the list is Commercial Vehicle Insurance. It is obvious from the name that it covers the cost of damage to your business vehicles like business cars, trucks, vans, and trailers.
It is mandatory that every business vehicle transporting goods or carrying employees must possess auto-insurance. Just like personal vehicles, commercial vehicles should be insured too.
You get cover from Third-Party damages, direct property damage, accidental damage, and against uninsured motorists. Sometimes the life of an employee is lost because the driver wasn’t insured. Such cases are also included in the policy.
You may also like to discover 10 Real Ways to make Money from Home and Online in Canada
How much does Business Insurance cost?
Small business policies can start as low as $19 per month. But, for a good commercial insurance covering adequate risks, you can anticipate spending an average $500 to $5000 per year in Canada.
Further, the following factors are considered when calculating the cost of your premium:
- Your Business size and
- The Business location
- Years of experience
- Annual Revenue
- Number of employees
- Insurance claims history
The bigger the company, the higher the price tag you will get for your insurance policy.
Here’s a table showing annual average insurance cost for a small to medium sized Canadian business.
| Business Size (Annual Revenue) | Annual Business Insurance Cost |
| Small Business (<$500k Revenue) | $500 – $5000 per year |
| Small to Medium sized Business ($500k to $5 Million Revenue) | $5000 – $15000 per year |
| Mid-sized Business (Over $5 Million Revenue) | $15000 per year |
How much Business Insurance do I need?
Being a Canadian entrepreneur, you might get confused as to how much business insurance you need. 1 million or 2 million, now that is totally based on the potential risks you wish to cover. Broader the coverage, higher the premium you have to bear. So, evaluate your budget and the types of risks your business is exposed to, and then finalize an insurance policy.
Also, have a look at Best Small Business Bank Accounts in Canada
Small Business Insurance: Is it Worth It?
Even though it is not compulsory to take small business insurance, it is for your good. Financial stability and coverage for other losses are some perks of being insured. Being in an early stage of business or owning a small business does not allow heavy expenditure on litigations.
Furthermore, taking insurance offers you tax deductions. You can deduct the cost of the premiums you pay, against the taxable income, thereby reducing your taxes.
If your small business is insured, other companies will feel secured to begin a great relationship. Thus, it increases your credibility. Buying insurance is a worthwhile option for entrepreneurs to add an extra layer of security to their businesses.
Which business insurance policy according to you, has the most benefits? Are there any damages that you can forego? Share your opinion below in the comments.
View Comments (1)
Planning to move to Canada and start a business with my friend. This blog really helped me understand the details about Insurance over there.