Is a Small Business Legally Required to Secure a Business Insurance Plan?
The short answer to the question is no. Canadian laws do not mandate small enterprises to secure a business insurance plan. However, it will severely hamper you from trading with other suppliers and customers who may require some form of protection before working with you. Also, you expose your company to a potential lawsuit or even bankruptcy if something untoward happens on the premises.
Perhaps the only exception is your company fleet, which you enroll for commercial auto insurance.
Do You Need a Business Insurance Plan if You Are a Freelancer?
Even if you work from home, you cannot expect your home insurance to cover claims filed against your company because the law considers your enterprise a separate entity with its identity and legal personality.
For instance, you remain liable if something happens to your customer after taking your products or if your professional advice steered them into a risky path.
So, if you don’t have protection, you might face bankruptcy as you fish deep into your personal resources to pay the damages.
Should You Even Get Protection for Your Company?
At the very least, you should get a general liability plan to secure you in case of a civil lawsuit or third-party injury. If you are a small business owner, you likely don’t have the resources to absorb additional losses since you’ve already stretched your budget to keep your operations afloat.
For instance, a slip-and-fall claim will cost you thousands of dollars. Without ample security, the payment will come directly from your pocket.
Types of Coverages
You must safeguard your company from further harm. Aside from the general liability business insurance plan, you can also consider:
1. Commercial auto – It will protect you in case of vehicle collision, theft, third-party property damage, death, or injury.
2. Professional liability – When your client’s business folds due to professional advice, you will be liable for the damage.
3. Property – The coverage allows you to replace machines, furniture, appliances, or other insured items.
4. Business Interruption – The plan will replace possible income loss in the event of fire, flood, or business closure. Ask your broker if this type of coverage rides on your comprehensive insurance. However, the protection does not include damages resulting from the pandemic.
5. Workers’ compensation – General liability only covers third-party injury or property damage. You need this plan to protect your workers if they get into accidents while doing their jobs.
6. Data breach – Recently, cybersecurity insurance has been added to various packages to cushion the impact on your business due to hacking. You must know enterprises close down within six months after a cyberattack, so you don’t take this type of thing lightly.
7. 7 Directors and officers – The plan will cover legal fees if you face a lawsuit while performing your tasks as a director or manager of the company. As a result, you won’t have to risk your assets to settle the damages.
Is Getting Yourself Protected Expensive?
Freelancers and small storeowners may balk at securing a business insurance plan because they fear it’s too expensive. But unfortunately, it’s one of the many misconceptions that hound the industry.
However, general liability protection costs only $500 to $1,800 annually, which translates to between $42 and $150 monthly. The amount is nothing when you consider the value for money that you get. You cannot place a cost on the peace of mind that a business insurance plan gives you