Is Small Business Insurance Mandatory in Canada?


Nov 12, 2020

Are small businesses required to have insurance?

The short answer is that insurance is not always required by law for small businesses to have in Canada, but that absolutely doesn't mean you can disregard your need for Small Business Insurance. As your business grows, you will likely encounter several situations where you will be required to show proof of insurance. Additionally, the peace of mind knowing you have insurance, as a back up plan for whatever life may throw at you, is a massive advantage within itself. We'll explain a couple scenarios where you may need to have Small Business Insurance in Canada as well as what happens if your small business doesn't have insurance.

4 Times When You May Need to Have Small Business Insurance in Canada:

1. When Customers Ask You For Proof of Insurance

Proof of insurance can be requested by any client or customer you encounter. Not being able to provide proof of insurance will make clients question your credibility and reliability as a company. It may seem unlikely or surprising that a customer will ask for proof of insurance, but requests for proof of insurance are actually common when signing contracts with clients or partnering with other companies.

2. When You Participate in a Trade Show

Participating in events such as trade shows, markets or networking sessions can be beneficial for small business owners but in order to do so, you’ll often be asked to provide proof of insurance coverage. Typically when a venue hosts a business networking event or trade show, the participating businesses will be asked to produce proof of insurance before they are granted admission. Examples of some events that may require participants to have insurance include:

  • Fairs

  • Tradeshows

  • Farmers Markets

  • Conventions

  • Award Ceremonies

  • Speaking Engagements

3. When You Sign Your First Commercial Lease

When your business begins to outgrow its surroundings, you will likely be looking into renting or leasing commercial space. When reviewing your lease documents, you will find a clause requiring you as the tenant to have insurance. These are obligations within the contract that will be required before you are able to finalize on any rental or lease.

4. When You Buy Expensive Equipment

When you finally decide to commit and buy an expensive piece of equipment, you are likely going to want to do whatever you can to protect it. Nearly every small business relies on some sort of equipment to operate and these are typically expensive. It is important to have insurance for the key pieces that keep your business going; Commercial Property Insurance can help protect you from unexpected issues with your expensive equipment. For example, if you own a wood shop, and a fire breaks one of your costly carving tools, you could look to your Property Insurance for coverage.

What Happens If My Small Business Doesn't Have Insurance?

The truth is, if you sell a product or provide a service you need Small Business Insurance to protect yourself from a variety of risks. Insurance is an essential part of any risk management plan for small businesses.Being caught without insurance can be costly in many ways; it can hurt your reputation, prohibit your business activities or end with a costly loss that you have not planned for.

For example, if you’re a contractor and a client asks to see proof of your insurance coverage, to which you reply, “What’s insurance?” or “I don’t have insurance”, they may second guess doing business with you. Furthermore, a customer asking for proof of insurance isn’t the only situation where you might find yourself looking for coverage. If you’re holding or taking part in an event, many places will ask for proof of liability insurance. Without proof of insurance you may not be able to join or host a successful event.

Additionally, a common scenario relates to business owners renting or leasing a commercial space. There is often requirements for proof of insurance to be provided to the landlord before you are able to take possession of the unit or gain access to your space. You do not want to be caught right when things are busy and you are in the process of moving to get insurance; get the coverage you need before you’re asked for it.

Here are a few questions you can ask yourself when considering your need for insurance:

  • Do I have enough money set aside to rebuild my business if I ever experienced a major fire?

  • Can I keep my business afloat while I’m waiting for my product to arrive, or for damaged equipment to get fixed?

  • Can I afford the legal costs associated with defending myself and settling a lawsuit?

  • How many months can I go without business income while still meeting my financial obligations with my supplies, employees and the government?

Learn more about how growth can impact your business.

Like previously mentioned, Business Insurance can become a necessity, especially as you grow and expand your business. It is likely you will meet barriers that require Small Business Insurance down the road; it wouldn't be ideal to have delays in these situations because of your lack of coverage. To avoid delays, loss of business and harming your reputation, it's best to already have insurance as a small business owner in Canada. Not only will it benefit you in the future, it can also protect and support you now. To protect your business, you can choose amongst many types of coverages such as Commercial General Liability, Professional Liability Insurance(E&O), D&O Insurance or Cyber Insurance. It is also important to have the right coverage for your specific business needs; that's why, Foxquilt offers tailored Business Insurance customized to your unique business. Our team of professionals will work with you every step of the way to make sure you have insurance built for your business. Get started on your online quote today.

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