“Anytime a business transacts with a customer, it does present an exposure,” says Cameron Chisholm, vice president and national director of Aon’s commercial business unit. “If you’re offering a product and you sell even just one product to a customer, it opens up the possibility of an allegation that a product hurt them or damaged their property, or didn’t operate in the way that it was supposed to.”

The same applies to service-based companies. Thankfully, business insurance protects entrepreneurs from the legal risk associated with these issues. While it may seem like a needless cost at first, having good coverage can be a lifesaver as you navigate the operations of your own shop, studio, firm or practice.

What is business insurance?

Business insurance protects entrepreneurs against any risks associated with their work. Broadly speaking, it consists of a handful of different types of coverage. General liability insurance covers bodily injuries or property damage caused by your products or services, while commercial property insurance covers damage to your business’ actual premises. Professional liability insurance (also known as errors and omissions insurance) covers your legal fees in the event of any lawsuits that arise from your work, including claims of error or negligence.

In addition to these common types of insurance, Rob de Pruis, national director of consumer and industry relations at the Insurance Bureau of Canada (IBC), says there are many other options to choose from.

One is business interruption coverage to compensate a business owner in the event they are unable to operate. Crime coverage, offering compensation in the even of hold-ups or cyberattacks, is also available. So, too, is management liability insurance to cover damages for any errors by your company’s directors and officers. This can include anything from directors making misleading statements to acting in a way that is considered misconduct. 

Every business is unique, de Pruis says, and the exact type of coverage needed by an entrepreneur varies widely. “Really, it depends on where you are geographically, what type of a business operation you have, and what your potential exposures or liabilities would be in the event something happened,” he says.

When do you need insurance for your business?

There is no law requiring Canadian businesses to purchase insurance once they reach a certain size (such as a revenue threshold) or have a certain number of employees. But insurance experts say anyone running their own enterprise should seriously consider it, especially as it grows. 

“As your company gets bigger, it is more recommended to have an insurance policy, because you’re more liable for some sort of claim or damage to happen to a third party,” says Aharshan Thangarasa, team lead for contractors at Zensurance. 

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