TL;DR
To choose the right business insurance coverage, work in order: first what you’re required to carry, then the losses that could close the business, then cover for how you specifically operate. Then set your limits and deductibles, compare quotes on the same terms, and review it every year. There’s no single right policy. The right mix depends on how you work, who you deal with and what would cause real damage if it went wrong.
What business insurance does, and doesn’t, do
Business insurance pays for losses your business couldn’t easily absorb on its own, such as a lawsuit, a fire, a burst pipe, a theft or a data breach, when the policy covers that event. It isn’t a promise that anything bad that happens is covered. Every policy has:
- Limits, the most it will pay, and often sublimits, a lower cap for a particular kind of loss
- Exclusions, the situations it doesn’t cover
- Conditions, things you have to do, such as reporting a claim promptly
- Deductibles and, for lost income, waiting periods before cover starts
Coverage and wording also vary by province and territory and from one insurer to the next. So the goal isn’t to buy “full coverage”. It’s to match the cover to how your business actually runs.
Start with what you’re required to carry
The first coverage to sort out is the cover you don’t get to choose about, because a law, a regulator or a contract requires it:
- Workers’ compensation. If you have employees, you may have to register with your provincial board, such as WSIB in Ontario or WorkSafeBC in British Columbia. The rules depend on your province and industry, and some industries are required to have coverage when others aren’t.
- Commercial auto. If the business owns, leases or regularly uses vehicles for work, it usually needs a commercial auto policy, since a personal auto policy may not cover business use. It’s a separate policy, and not one Clearly Rate refers.
- Liability insurance your contracts or licence require. No general law requires most businesses to carry general liability insurance, but it’s often required in practice. Landlords commonly ask for it before you sign a commercial lease. Clients, especially larger companies, municipalities and general contractors, may require a minimum limit before you start work. Some licensed trades and regulated professions must show proof of insurance to get or keep a licence.
If any of these apply to you, they’re not optional line items to weigh against your budget. They’re the floor.
Cover the losses that could close the business
After the required cover, the next question isn’t “what’s available?”. It’s “what loss could I not absorb?”. For most small businesses, it’s one of these:
- General liability (CGL) covers claims that your business injured someone or damaged their property, including legal defence costs. A customer slipping in your shop, or a door you dent while moving equipment into a client’s home, are typical examples. If customers, clients or the public ever come to you, or you work on their property, this is usually the first policy to look at.
- Commercial property covers your building, equipment, stock and tools against causes of loss such as fire, theft, severe weather and some water damage. A named perils form covers only the causes it lists. An all-risk form covers everything except what it excludes. Ask which one you’re being quoted.
- Business interruption covers lost income and ongoing costs, such as rent, some payroll and loan payments, if a covered event like a fire or flood shuts you down for a while. It’s usually added to a property policy rather than bought on its own.
Running the business from home doesn’t take you out of this list. Home insurance policies commonly exclude or limit business activity, so you may need a business add-on or a separate policy, especially if clients visit, you keep stock at home or you use specialized equipment.
A useful gut check: if the worst version of an incident happened tomorrow, would it cost you a bad quarter, or would it close the business? Cover the second kind of risk first.
Add cover for how you specifically operate
Your industry is a starting point, not the whole picture. A consultant working from home has very different risks from a contractor with a van and a trailer of tools, even if they earn about the same. Look at how you actually work:
- Professional liability (errors and omissions) if you give advice, design something or deliver a service where a mistake could cost a client money. Many of these policies are claims-made, which means the claim usually has to be made and reported while the policy is in force. If you cancel or retire, ask about tail coverage for claims about past work that arrive later.
- Cyber insurance if you take payments, store customer information, rely on email or couldn’t operate without your systems. It can help with breach response and forensics, notifying clients, credit monitoring, legal costs and lost income after an attack.
- Directors and officers (D&O) if your business is incorporated with directors, officers or a board who could be personally named in a claim.
- Other add-ons to ask about, depending on your work:
- Crime insurance, for money or stock stolen by an employee
- Equipment breakdown, for sudden mechanical or electrical failure, which a property policy often doesn’t cover
- Tools and equipment cover (sometimes called a contractor’s equipment or installation floater), for tools and materials on job sites or in transit
- Builders risk, for a building under construction or renovation
This is also where it’s easy to over-buy. A single-location shop doesn’t need the same cyber cover as a business processing thousands of online orders a day. Match the cover to your actual exposure, not to a generic checklist.
What business insurance usually doesn’t cover
Most frustration with insurance starts here, so it’s worth knowing the common gaps before you buy. Many business policies don’t cover:
- Wear and tear, poor maintenance and gradual deterioration
- Intentional acts and certain illegal activities
- Flood, earthquake and sewer back-up, unless you add them or buy separate cover
- Injuries to your own employees, which are generally handled through your provincial workers’ compensation board instead
- Your own faulty work, under a general liability policy, though damage it causes to someone else may be covered
If one of these matters to your business, ask whether it can be added.
Common coverage by type of business
Different businesses tend to face different risks. These are common examples, not a recommendation for your business:
| Type of business | Common risks | Coverage often considered |
|---|---|---|
| Retail and e-commerce | Customer injuries, theft, damage to stock, fire or water damage, cyber attacks | General liability, commercial property, business interruption, cyber |
| Contractors and trades | Injury or damage on job sites, stolen tools, materials in transit, vehicle claims | General liability, tools and equipment cover, commercial auto, property if you have a shop, business interruption |
| Professional services and consultants | Claims about advice or errors, data breaches, email fraud, office downtime | Professional liability, cyber, general liability, business interruption |
| Restaurants and food services | Fire or water damage, equipment breakdown, spoiled food, customer injuries, alcohol-related claims | Commercial property with spoilage cover, general liability, equipment breakdown, business interruption, liquor liability where it applies |
Set your limits and deductibles
Your liability limit is usually set by your contracts and lease first, since landlords and clients often name a minimum you have to meet. Beyond that, think about your worst realistic case: how serious an injury claim could be, what legal costs might run to, and how long you could manage if your income stopped. That helps you decide how high a limit you want.
A higher deductible usually lowers the premium, but you pay more yourself when you claim. Choose one you could pay quickly without putting pressure on rent, payroll or cash flow.
For what drives the price, see how much business insurance costs.
Compare quotes on the same terms
Compare quotes “apples to apples”: the same limits, sublimits, deductibles, exclusions and add-ons, and, for business interruption, the same waiting period and length of cover. A cheaper policy can cost you more later if an important coverage is missing or capped too low.
It’s also worth asking how claims are handled, so you know what support to expect if you have a loss.
Come prepared
Having these ready makes quotes faster and more accurate:
- What your business does, and roughly what share of your work is in each activity
- Your annual revenue and payroll, and how many employees you have
- Your address, and details about your premises
- The value of your equipment and stock
- Any limits or certificates your leases or contracts require (see what a certificate of insurance is)
- Your claims history
Before you buy, write down your questions, and read the policy itself. If part of it doesn’t make sense, ask until it does.
Review your coverage every year
Your insurance should change as your business does. Review it at least once a year, usually at renewal, and whenever you:
- Add new services
- Hire your first employees, or more of them
- Buy vehicles or equipment
- Take on bigger contracts
- Grow your revenue
- Change how you handle customer data
Don’t buy coverage you can’t explain back
A good test before adding any policy: can you describe, in one sentence, the loss it would pay for? If you can’t, ask until you can, or leave it out for now. Coverage that’s there because it came in a package, not because it addresses a risk you identified, is often the first thing worth looking at again at renewal.
When you’re ready, tell us about your business and we’ll refer you to licensed brokers who can quote and help you spot gaps. For an overview of each coverage, see business insurance.
