However, business insurance can be crucial in ensuring that your hard work doesn’t get undone by an unforeseen event, such as an illness or an accident in the workplace. In this article, we’ll look at how business insurance in Canada works, how commercial insurance compares to personal insurance, the ways business insurance can protect you and the different types of business insurance available in Canada.
We’ll also look at how you can find the right business insurance coverage for your unique needs.
What is business insurance?
Unlike personal insurance (such as life insurance and critical illness insurance), which is designed to protect individuals, business insurance is specifically designed to protect businesses and their owners.
There are various types of business insurance, all designed to protect you from risks related to your business’s activities. For example, they could include coverage protecting your business property and machinery from damage or fire, or they could provide you with money to protect yourself if you were ever sued.
How business insurance can protect you
Given the wide range of businesses in Canada, along with the potential risks that many of them face, business insurance is more complex and wide ranging than personal insurance. In general, however, there are four ways that business insurance offers protection:
Financial protection
If your company has to deal with a sudden and unexpected expense, it could cause irreparable damage. Insurance can provide you with the finances to deal with all manner of potential events that could cost you money. Examples of situations where business insurance could provide financial protection include:
- A customer suing you for damages (due to injuring themselves on your property or being hurt by your product, for example).
- Your business property being damaged, such as due to fire or water.
- An employee damaging property (for example, due to an accident while the employee was using a company vehicle).
- An employee injuring themselves on the job.
- Broken machinery that restricts your business’s output and therefore its income.
To fulfill legal requirements
Depending on your industry, you may have a legal obligation to have certain forms of insurance. For example, if you have a construction or engineering business, you would have to have professional liability insurance, otherwise, you may face heavy fines or be unable to bid on certain jobs.
To build your business’s credibility
Having insurance tells your customers and prospects that you care about them. It also tells the world that you’re a legitimate and credible business. If a potential customer has a choice between a company with insurance and one without, that choice is quite simple.
To bring you peace of mind
Business owners have enough to worry about at the best of times; making payroll, paying suppliers, getting product out on time. Worrying about what might happen if there were an accident, a fire or if you got sued can only increase your anxiety. Having full business insurance coverage can help you to focus your mental energy on what matters: making a success of your business.
The different types of business insurance in Canada
Business insurance comes in several forms, to cover every eventuality. These are the most common types of business insurance you’ll find in Canada:
General liability insurance
This type of insurance protects your company in the event of a range of incidents, such as injuries, damage to property and litigation from customers and other third parties.
Errors and omissions insurance
Also known as professional liability insurance, this type of business insurance is typically used by companies that provide their clients with services, such as advice (for example, a realtor or mortgage agent). This protects the business against legal action for negligence or other forms of professional misconduct.
Defending your business in court can be very expensive, even if the charges are unfounded, so errors and omissions insurance is essential for these types of businesses. Some professional bodies insist that their members have errors and omissions insurance, for example, some realtor associations.
Commercial property insurance
This insurance protects any business-related real estate and property, such as your office, warehouse, factory, raw materials, finished product and equipment. You’re typically covered for theft, and damage due to fire, water and vandalism.
Business interruption insurance
This will replace sources of income that have been stopped or interrupted, due to a covered event. For example, let’s say that essential equipment you use to provide your services is stolen. Business interruption insurance would help to cover your operating costs while you’re in the process of replacing the equipment.
Commercial property insurance would provide the money to replace the machinery, but it wouldn’t replace any lost revenue.
Management liability insurance
This provides protection from damages resulting from the actions of a company’s directors or managers. This could include a director misleading customers or some other kind of perceived misconduct. This insurance typically protects both the company and the individuals.
How do you know when you need business insurance?
In truth, most small and medium-sized businesses typically need some kind of business insurance. If you want to protect yourself and your business from any potential disaster, you should look into the business insurance options available for your sector.
If your business takes part in any of these activities, it’s probably wise to have business insurance:
- Selling products directly to the public.
- Using third parties to sell products.
- Providing professional services.
- Providing products or services to other companies.
- Attending trade shows.
Also, the bigger your business becomes and the more customers it has, the greater the chance of something happening to a third party or employee that could result in legal action.
Getting advice on the best business insurance options for you
Your IG Advisor can provide you with a comprehensive insurance strategy for your business. They’ll take into account potential risks and the size and scope of your business to recommend the most appropriate insurance policies for you. Plus, they’ll make sure that this strategy fits in with both your business plan and your IG Living Plan.
Call your IG Advisor today to set up an insurance strategy appointment. If you don’t have an IG Advisor, you can find one here.
Written and published by IG Wealth Management as a general source of information only. Not intended as a solicitation to buy or sell specific investments, or to provide tax, legal or investment advice. Seek advice on your specific circumstances from an IG Wealth Management Consultant.
Insurance products and services distributed through I.G. Insurance Services Inc. (in Québec, a Financial Services Firm). Insurance license sponsored by The Canada Life Assurance Company (outside of Québec).
