I Own a Small Business: Questions About Commercial Insurance
Getting set up with insurance can be intimidating. How can you ask questions about your coverage if you don’t know where to begin? Luckily, the Insurance Bureau of Canada has a good list of questions to ask your insurance representative when it comes to commercial insurance for small businesses.
What kind of insurance do I need? The type of insurance you need will depend on factors such as if your business is run from home or from a rented premise. There are also different types of insurance such as liability insurance, errors and omissions (E&O) and professional liability coverage. You can also look into offering health, disability or life insurance to your employees. And, don’t forget workers’ compensation coverage.
Are there perils for which I can’t buy insurance? No policy covers every single thing that could go wrong. Insurance is intended to protect from loss or damage from unforeseeable events, not for things like wear and tear. Talk to your insurance representative to compare policies to see what will suit your business best.
Are there circumstances under which water damage would be covered? Yes, but it depends on the coverage you purchased under your own insurance policy.
Do I have to take what’s offered? Not at all. Speak with your insurance representative to ensure all possible avenues for coverage have been explored. Make a decision based on what coverage you need, your own perception of risk and how much you can afford either in premiums or in losses that you can cover yourself.
Will my homeowner’s policy cover my home business? Your homeowner’s policy is not designed to adequately cover your business, regardless of how large or small your business may be. Commercial insurance is the best option for any business. You must also advise your home insurance representative when you start a home-based business such as a daycare.
If my business is home-based do I need liability coverage? Yes. Liability is perhaps the greatest risk with a home business. The personal liability portion of your homeowner’s policy will not provide adequate coverage for an event or accident related to your home business.
What does errors and omissions or malpractice insurance cover? If you are paid to give professional advice, you need “errors and omissions insurance.” If you give a client professional advice that is inaccurate or incomplete and the client’s business suffers as a result, errors and omissions insurance will cover the damages and defence. “Malpractice insurance” will cover you if you provide a service that goes awry. For example, a hairdresser or dog groomer may consider malpractice insurance in case a treatment causes damage. You may also find this kind of insurance offered through professional associations.
What is business interruption insurance? What does it cover, and do I need it? Depending on the policy limits you select, business interruption insurance covers what your business would have earned during the
period of shutdown following an insured loss plus continuing expenses. For example, if your garage business shuts down because of an insured loss, you would collect the income you would have expected from repairing cars during that period. Expenses you no longer have to pay while your business is closed would be subtracted. Alternatively, extra expense insurance is available to cover expenses to get your business operating immediately following an insured loss.
What is a deductible and how does it affect my premium? The higher the deductible (the portion of a claim that you have to pay), the lower the premium (the cost of your insurance). Compare premiums with different deductibles, then decide whether the lower premium is worth the higher amount you would have to pay out of pocket if you had a claim.
What can I do to keep my insurance costs down? Choose the highest deductible you can afford. Manage your risks for potential losses. If you are a professional, keep your credentials and skills up-to-date to be sure your advice and services are sound. Your insurance representative has a vested interest in minimizing the frequency and severity of losses, so ask for an inspection of your premises to help identify any exposures to damage or theft.
Don’t be afraid to ask your insurance representative questions! It is part of their job to make sure that you understand your coverage. Understanding your insurance is key to being protected.