Running your own business comes with a lot of responsibility (not to mention risk), and often, new business owners end up making mistakes when taking out an insurance policy—mistakes that can harm the business and incur problems down the road. Most start-ups and small business owners know how important it is to insure their company and their employees, but it’s new territory. Let’s make it simple.
If you have a physical location for your business, there are nine standard components that you should include in your business insurance:
1. Property Coverage
This covers physical damage by fire, windstorms, water damage, theft, and more. It’s based on the replacement value of our fixtures, equipment, and leasehold improvements and also needs to include your stock value. Coverage is also written on a broad form basis, and damage caused by damage resulting from sewer backups, floods, and earthquakes are optional additions.
2. Equipment Breakdown
Do you run equipment? If your answer is yes, keep reading! If not, you can skip to number three. Answer the following:
- Is your equipment susceptible to electronic damage, power surge or breakdown?
- Are you heated by a commercial boiler?
If you have answered yes to either of these, you should carry equipment breakdown coverage.
3. Business Interruption
This is a big one. While property insurance replaces your property, in the event of a fire, flood, or earthquake, you’ll likely be out of business (and cash flow) while you rebuild. Business Interruption pays fixed costs that continue even if you are not operating, including your wages, leases that continue, bank payments, and lost profit.
4. Crime Coverage
Better safe than sorry—yes it’s cliché, but crime coverage protects your business in the event of employee dishonesty (theft), as well as coverage for stolen cash, counterfeit currency, and forgery. There is also coverage available for phone transfer fraud and computer fraud, but this varies greatly by insurer. Be sure to ask what your options are and what insurance is available to you.
5. Commercial General Liability
This covers property damage and bodily injury caused in your premises, your operations, or from your products. The minimum limit included is $2,000,000, but many leases or supplier contracts require higher limits. The best thing you can do is ask! Too often, people don’t ask and end up in an unfavourable situation.
6. Tenants Legal Liability
If you cause damage to the premises you occupy by fire, smoke, water, or other damage, your landlord’s insurance will pay, and then seek you for recovery. Accidents happen, and it is best practice to be prepared.
7. Professional (or Errors & Omissions) Liability
Professional liability insurance protects for financial losses arising from acts, errors or omissions made in the rendering of services. This is a vital form of coverage that protects against financial losses resulting from lawsuits initiated by clients. These losses not only include damages awarded for successful claims, but also the legal costs of defending against these claims (successful or not). Traditionally this coverage was limited to recognized and designated professionals, but this has been expanded to including all consultants, and even manufacturers: this coverage can protect you if your project fails to meet manufactured specifications. Most policies do not include professional liability and we would be happy to discuss with you.
8. Building Glass
How many cracked windows have you seen? A bird flies into the glass, an errant soccer ball breaks a window pane, a delivery box smashes into a glass feature—it happens, and trust us, some of the scenarios are downright strange. Even if you don’t own the building, most leases make tenants’ responsible for damage to windows or doors. Many policies cover glass as an extension under the property insurance, but a $1,000 deductible applies, so you are essentially ‘self-insured’ for any broken windows.
9. Cyber / Privacy Breach Liability
This is a newer coverage and is a separate topic on its own – but you need to think about losses you could suffer if you accidentally release information on your clients or supplies due to a break-in of your business, loss or theft of a laptop, or a virus or ransomware hack. We are all aware of these risks but most business owners haven’t considered the extent of the risk. Some business policies include a low limit of coverage, but this is something you should discuss in detail with your insurance professional.
Summary
Insurance needs vary from business to business, depending on your industry, the size of your company, and multiple other factors. Before getting business insurance, make sure to familiarize yourself with each of the coverage types we touched on, and then sit down with a professional. Have a list of questions, and meet with an insurance professional who understands your specific type of business. There is no (effective) one-size-fits-all type of business insurance, and trust us when we say that insurance for a farm is a lot different than insurance for a cafe.
Have questions about business insurance? Let us know—because if you haven’t noticed, we love to talk about insurance!
