Does Your Business Have Enough Commercial Insurance?

February 18, 2025

Does your small business have enough commercial insurance to financially protect it from a lawsuit, vandalism, or fire?

In Canada, many small business owners don’t have enough commercial insurance coverage and some don’t have any, leaving them open to financial losses that could force them to close permanently.

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Why your small business needs commercial insurance

Not having commercial insurance or enough commercial insurance is a risky decision for your business because you would have to pay all expenses, like rent or repairs, related to a sudden closure.

Business insurance is a financial safety net should your small business be forced to close due to fire, severe weather, or vandalism, among other covered events in your commercial insurance policy.

Keep this in mind: Could you afford to pay the medical and legal costs should a customer get injured at your business and sues you?

The risks of not having business insurance

• Having to pay all expenses, such as rent and repairs, on your own
• Being refused a bank loan because banks can require businesses to have some type of insurance coverage if they’re taking out a loan
• Having to pay medical bills or legal fees should someone get hurt at your business and sue you

What is business liability insurance?

It protects a business from financial losses that could result from accidents, errors, or negligence in the event of a lawsuit.

Liability insurance usually covers bodily injury and property damage involving a third party -- customer, supplier, or member of the public.

If your business is sued, liability insurance can help cover the costs of your legal defense and any settlements.

What liability insurance coverages does my business need?

Commercial general liability (CGL) insurance

Without CGL insurance, you will pay costs related to third-party (customer/supplier/member of the public) injuries or damage to their property out of your own pocket as a business owner.

If you were sued, commercial general liability insurance would cover the legal costs to defend the claim against your small in court, as well as costs to cover damages to compensate third parties whether you win or lose your case.

What does CGL insurance cover?

• Injury to a third party who is not your employee
• Damage to someone’s property
• Damage to rented property
• Medical bills if someone is injured
• Legal costs and settlement costs of liability lawsuits filed against you
• Liability lawsuits related to slander and libel

Professional liability insurance

This type of insurance helps protect your business from claims of negligence when performing your duties. It’s also called errors and omissions insurance.

In the case of a negligence claim, for example, a store owner with E & O insurance would have the policy pay for some or all of the claim costs.

Cyber liability insurance

Do you keep sensitive financial information and data belonging to your clients and to your business? What if your system is hacked by cyberthieves? Cyber liability insurance will help protect your small business financially should there be a cyber-attack and help pay for the costs of restoring your system.

Depending on the size of the data breach and the information that was taken, the customers who are affected can hold you liable and sue you for damages.

Other insurance for small businesses

Commercial property insurance

Commercial property insurance provides financial support to replace or cover repairs to your business if it is damaged by a flood, fire, or severe weather. It also covers vandalism and theft.

Commercial property insurance also covers the firm’s contents such as computers, furniture, tools, equipment, and inventory. Commercial property coverage also extends to protect others’ property that is under your care.

Business interruption insurance

This type of insurance supports you when your business operate due to a covered loss.

There are a number of losses that can force your firm to shut down. Some examples are:

• Damage to your equipment from fire or vandalism
• A major reduction in revenue due to a client/supplier facing losses of their own
• A disruption in your supply chain

Business interruption insurance can help with these expenses:

• Payroll
• Rent
• Utilities
• Property taxes
• Alarm monitoring
• Relocation of your business

Equipment and tools insurance

It replaces, or repairs damaged, stolen, or lost equipment and tools, accessories, or other property that you use for your business.

Anything valued at less than $1,500 is considered a tool and anything above that limit is considered equipment.

Commercial auto insurance

Note that if you are using your car for your small business, it won’t be covered by your personal car insurance policy. You will need commercial coverage as part of your insurance package.

What’s preventing small businesses from getting commercial insurance?

Studies consistently show that the cost of a business insurance premium is an issue for many small business owners. Shop around.

Why you need insurance for your small business

When you sign a commercial lease: A commercial lease usually has a clause requiring you as the tenant to have business insurance before you are able to finalize the agreement.

When clients/customers ask for proof of insurance: Not being able to provide proof of insurance to clients or customers who ask for it will make them question your reliability and credibility as a small business owner.

Financial protection: Business insurance protects you from lawsuits, accidents, and mishaps that could have financial consequences.

Business insurance helps protect your business from the unexpected.