Insurance for your small business

The right type of business insurance can provide peace of mind in both your personal and business life.

Why do I need business insurance?

Your business may have many assets: vehicles, office space and equipment, inventory, an indispensable employee or partner and, most importantly, yourself. To protect these assets and to protect your business from potential risks, you should consider getting insurance.

All businesses take some risks, but taking too many risks or failing to protect yourself does not make good business sense. Could your business survive if one of the partners dies or becomes disabled? Would you have sufficient cash on hand to deal with any business emergency that could arise? In many cases, the answers to these and other questions about risk is "no".

This document will help you understand the different types of insurance that are available to protect you and your business from potential liability.

Types of insurance

Insurance needs vary greatly and it is best to get advice from an insurance broker or agent who is familiar with your specific type of business. Below are different types of insurance that may apply to your business.

Insurance for owners, partners and key employees

The loss of a key person can devastate your business and your livelihood. These types of insurance can help protect your business and your family from potential risks:

• Life insurance — Protects your family in the event that something happens to you. This is especially important in the case of a sole proprietorship, because the owner is personally liable for all the debts of the business.

• Disability insurance — Will provide you with income for a specified period of time, if you are unable to work due to an injury or illness.

• Partnership insurance or buy-sell insurance — If your business partner passes away, partnership insurance will allow you to purchase the shares and continue running the business.

• Critical illness insurance — Provides you with a lump sum benefit, if you are diagnosed with a critical illness.

• Key person insurance — If you rely on certain key people to help run your business, protect yourself against the loss of these key employees.

Speak to your accountant to find out which of these are deductible as business expenses and which ones you will need to pay for yourself as an individual.

Insurance for business property and earnings

You need to protect your assets and earnings in the event that a disaster or emergency destroys part or all of your business premises and assets. This could include:

• Property insurance — Property insurance will cover the property and buildings owned by your business in the event of destruction or damage due to things like fire and other perils.

• Contents insurance — This covers assets that you store at your business premises. If you are leasing space for your business, the owner of the property probably has property insurance, but you are likely responsible for your own contents insurance. If you run your business out of your home, you will likely need separate contents insurance for your business assets.

• Business interruption insurance — If you need to shut down your business temporarily due to a fire or other peril, business interruption insurance will cover your loss of earnings until you are back in business.

• Vehicle insurance — You will need to insure any vehicles that your business owns. If you use personal vehicles for business purposes, be sure to advise your insurance company.

Liability insurance

Mistakes happen. You, your employees, your equipment or your suppliers could be the cause of mistakes that ultimately end up hurting your customers, your employees or other people who are involved with your business. To protect your business from being sued, you should consider these types of insurance to limit your liability:

• General liability — Covers injury to clients or employees on your premises

• Product liability — Provides protection in the event that your products are defective or cause serious harm to those using them

• Professional liability insurance — Provides protection if you are sued by a client for errors, omissions or negligence, when performing professional services

• Cyber liability — Protects in the event of a lawsuit stemming from an electronic security breach involving compromised personal or commercial information. Can include situations relating to the theft of devices containing organizational, client, employee, or similar data.

Accounts receivable insurance

Having a client that does not pay can leave you in a difficult situation. You have to pay your employees and suppliers, and are essentially stuck covering the costs of goods sold, without the corresponding revenue. Accounts receivable insurance, also known as credit insurance, can help protect you from this risk, when a client goes bankrupt or refuses to pay.

The risks are often greater when dealing with export markets. The government offers export insurance to cover a variety of risks including accounts receivable insurance.

• EDC Accounts Receivable Insurance
  Insure up to 90% of your export business against a number of commercial risks.

Health insurance

Providing a health insurance plan for employees can be a key factor in recruitment and retention of employees. You can talk to an insurance broker or company about group plans covering supplemental health and dental benefits for your employees.

Get the right insurance for your business

Making sure you have the correct business insurance can provide peace of mind. To discuss your business insurance options, contact an insurance representative to find or develop a plan that is right for you and your business. You may also wish to contact your local chamber of commerce or industry association, as some organizations offer members lower rates on their business insurance.

• Insurance Bureau of Canada — business insurance
  Having the correct insurance could be essential to the survival of your business. Find out what options are available to you.

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