Yahoo Finance 4 common types of small business insurance, and how to determine which is right for you
In the dynamic world of small business, facing unexpected challenges is a constant reality. One of the most critical yet often overlooked aspects of safeguarding a small business is understanding and investing in the right commercial insurance. Together with TD Insurance, here’s a closer look at four common types of commercial insurance coverages in Canada, along with guidance on how small business owners can determine their specific insurance needs.
1. Commercial Property Insurance: Safeguarding your business assets
Commercial Property Insurance is a cornerstone for any business with tangible assets. It provides coverage for physical loss or damage to your buildings, equipment, inventory or other contents due to fires, theft and other covered events. For instance, if you're a photographer, you might want coverage for your studio or your photography equipment. If you're a retail store owner, you might want coverage for your inventory, or if you are a contractor who takes your tools on site, you would need a floater to cover the equipment that travels with you.
Business Interruption Insurance – also known as Business Income Insurance – is an optional but critical coverage that can be added to your commercial property policy. It compensates for lost income and extra expenses incurred if your business is temporarily shut down due to a covered event. For example, if you're a retail store owner and your store has suffered damages due to a fire caused by a sudden electrical malfunction, a commercial property policy can cover the costs of repairs and replacement of damaged stock, mitigating significant financial strain. While your retail store is closed for repair, business interruption coverage can protect your income stream to help ensure you and your business can continue to meet financial obligations and emerge resilient.
2. Commercial General Liability Insurance: Protecting against third-party claims
Commercial General Liability (CGL) is a fundamental policy that safeguards your business against claims arising from injuries or damages that you, your employees, your product or services may cause to other people or their property. It also covers non-physical injuries like slander or false advertising.
This coverage is crucial for virtually all small businesses that interact directly with customers or clients. Many business owners underestimate the potential costs of lawsuits, which can be financially crippling. A classic case would involve a small café where a customer slipped and sustained an injury. A CGL policy may cover any related legal fees and medical expenses incurred by the customer if the business is found liable, protecting the café owner's finances.
Similarly, an apparel manufacturer sued over a product-related injury – for example, a severe rash caused by a dress fabric – would find relief in their CGL policy covering legal fees and compensation expenses. Even in cases such as mail-out flyers claiming your scone is the “best in town” and another local business taking actions against you for false advertising, CGL may step in to cover the cost of settling the claim if you are found liable.
3. Professional Liability Insurance: Shielding expertise-based service against errors
Professional Liability Insurance (also known as Errors & Omissions or E&O Insurance) is designed to provide financial protection against claims alleging negligence, errors or omission committed during business activities that resulted in a financial loss for the client.
This coverage is distinct from Commercial General Liability (CGL) Insurance, which covers physical damages or injuries, whereas E&O coverage provides financial security against professional errors or negligence. However, many businesses can benefit from having both coverages in place. For example, a marketing agency with a physical studio that clients often visit for meetings and presentations would need a CGL policy to cover against incidents such as a customer slipping and sustaining an injury while visiting the business.
Alternatively, the same agency might create a marketing campaign for a client which accidentally uses a copyrighted image without proper authorization, and the client, facing legal action from the copyright holder, may sue the agency for the financial losses incurred. Here, professional liability (E&O) insurance is essential as it could cover the legal fees as well as the associated financial damages awarded in the lawsuit, protecting the agency from losses linked to error in their day-to-day operations.
4. Commercial Auto Insurance: Protecting your business on the move
For small businesses that rely on vehicles for operations, such as a florist with a delivery van, a duct cleaning contractor with a vehicle equipped with specialized vacuum system, or a photographer driving their van which carries cameras, lenses and lighting modifiers to use at booked events, Commercial Auto Insurance is an essential safeguard.
Using a vehicle for commercial activities implies facing different types of risks compared to personal commuting such as going to work or running personal errands. A commercial auto policy may help to address these unique risks and provide coverage for your vehicle’s damages, or liability and medical expenses for you and the employees that drive your vehicle, if an accident were to occur.
Commercial insurance stands as a pillar of protection for small businesses in Canada, safeguarding against a spectrum of risks and uncertainties. While the world of insurance can seem complex, understanding the basics and seeking advice from a licensed insurance advisor can lead to more informed decisions that fortify your business's resilience. With the right coverage in place, businesses can focus on growth and success, knowing they are well-protected against the unforeseen.
With customized coverage options tailored to your business needs, learn more about how TD Insurance can help your business get the protection it deserves.
Visit the Yahoo Canada x TD Insurance Small Business Insurance Hub for more.
The content on this page is for general information purposes only and does not constitute legal advice. Any coverages described herein may be subject to additional eligibility criteria, limitations and exclusions. In the event you make a claim, potential indemnification is also subject to the receivability of the claim and the type of coverage you bought.
In the case of conflict between the content on this page and your policy wordings, your policy wordings shall prevail. Please speak to an Advisor or consult your policy wordings for further details.
