Business insurance 101: The basics for business owners

Determining what types of business insurance you need can be confusing for even the most experienced business owner.  A good way to start is to understand the fundamental basics of what is covered by business insurance:  property, liability, income, and people.

1.    Property: As a business owner, you need to insure the business property that you own, such as the building from which you operate you business, equipment, tools, and stock.  If you don’t own the unit or building, you will want insurance for tenant’s improvements. Tenant’s improvements refers to any changes to the unit or building that you have installed which have increased the value of the premises.

When estimating the $ amount of property insurance that you’ll need, always keep in mind that it should be based on replacement cost i.e. how much it would cost to replace everything in the current marketplace.

In British Columbia, insurance for vehicles is provided by ICBC.

2.    Liability: Liability insurance protects your business from mistakes that you or your employees may make and for which your business is held legally liable.  There are 2 main categories of liability insurance:

Commercial General Liability insurance – which generally include coverage for bodily injury, property damage, personal injury, and advertising injury.

Professional Liability insurance – also known as Errors & Omissions insurance.  This type of liability protects businesses for errors and omissions that may occur while carrying out professional services.  In some fields, professional liability insurance is mandatory:  for example, doctors, lawyers, architects.  In other fields, professional liability insurance is not mandatory, but is highly recommended.  Examples of businesses that should have professional liability insurance include IT companies, graphic designers, management consultants, etc.

Other types of liability insurance that are also offered are:

Tenant’s liability insurance:  to insure you against legal liability for damage that your business may cause to the premises that you rent.

Non-owned auto liability insurance: to protect your business against third party liability for claims made against your employees while they are driving their own cars on company business.

Always make sure that vehicles used and/or owned by your business have adequate third party liability insurance through ICBC.

3.    Income:   Let’s imagine the worst-case scenario.  A major catastrophe such as a fire strikes your business.  Property coverage will restore your building, equipment, and stock, but it may take a long time to get the business up and running again.  Business interruption insurance gives you coverage to provide funds to re-start your business and earn income until you’re business is back on its feet.

4.    People: People are the engine of every business. Owners, managers, employees should be protected. Types of coverage include workers compensation, critical illness insurance, disability insurance, and health insurance.

Using these 4 basic elements of business insurance, you will be able to identify the key areas of risk for your business.  And then, working together your insurance broker, you can determine with relative ease the most appropriate business insurance your need.

Do you have any business insurance questions?  Would you like an insurance quote for your business?

Contact Habitat Insurance Agencies Ltd at 604-438-5241 or [email protected]

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Disclaimer:  This article is designed to provide information for personal use only.  Please consult your professional insurance broker for further information. Habitat Insurance Agencies Ltd is not responsible for any legal disputes of this matter.