Is Business Insurance Required By Law?

There is so much to consider when starting a business, from getting your product or service ready to figuring out pricing that will attract customers. In the hustle and bustle of launching your business, it can be easy to overlook business insurance.

It might seem like an extra expense you don't need, but it is an important factor from a business standpoint. While it’s not illegal in some cases, it's considered non-compliance with legal requirements if you run a business without insurance.

This article will break down the different types of insurance you might need and what could happen if you don't have the right coverage in place.

What Is Business Insurance?

This type of insurance protects your business from financial losses due to unfortunate events occurring during normal business operations. This includes lawsuits, claims, natural disasters or fires, or accidents.

Having small business insurance can help pay for claims arising from a variety of risks, such as property damage, bodily injury, vehicular accidents, or employee-related risks.

Common Insurance Types for Businesses

Business insurance typically includes several different types of coverage, not one specific policy you can purchase. Brokers usually bundle various insurance types under one package to ensure the client’s unique insurance needs are met.

Business insurance policies typically include the following:

• General liability insurance: This covers costs associated with claims of bodily injury or property damage that occur as a result of business operations
• Property insurance: This helps pay for expenses associated with damage to business property resulting from events such as fire, theft, or natural disasters
• Professional liability insurance: This helps pay for damages associated with negligence, errors, or omissions related to professional services provided by businesses such as doctors, lawyers, and accountants
• Workers' compensation insurance: This type of insurance provides coverage for employees who are injured or become ill as a result of their work. It also helps pay for lost wages while the employee is in recovery
• Commercial auto insurance: This insurance coverage helps pay for costs if company-owned cars get into an accident

Not Having Insurance is Risky Business

Canadian law doesn’t mandate companies to have business insurance. However, it is highly encouraged. By not having it, you risk exposing yourself to damages and losses without protection, and that could lead to serious consequences.

Some of the risks you might face include:

• Having to pay medical bills or legal fees in case someone gets hurt
• Needing to pay the costs of replacements or repairs out of pocket if your property or someone else’s property gets damaged due to negligence
• Having to cover lost wages for your employees who get ill or injured while on the job, which can include medical bills in extreme cases
• Being refused a bank loan—banks often require businesses to have some type of insurance coverage if they’re taking out a loan

If you own company cars or you’re in the trucking industry, then a form of transportation insurance or fleet insurance, like commercial auto insurance, is needed before you can operate your business. This type of insurance is mandatory for all Canadian provinces and territories, but some areas may require more coverage than others.

Additionally, if you operate a business with employees, it is your responsibility as the employer to provide workers’ compensation insurance. This protects your staff against losses in case they fall ill or are injured on the job. Some provinces may also require businesses to provide insurance to non-regular employees, such as contractors.

How Business Insurance Can Protect You

Consider the following: you work as a fitness instructor and have to rent small venues to teach sessions. However, as you quickly discover, venues—such as local gyms—only rent to people with insurance to reduce financial liabilities.

Now imagine one of your clients getting injured during your class. They might sue the venue for damages because the incident happened at the gym. The venue might require you to have general liability insurance to cover damages with this in mind.

Another example would be if a fire or calamity forces you to stop business operations temporarily. Experiencing business interruptions without insurance risks having all your hard work and investments go to waste.

Getting hit with lawsuits without insurance can also become a huge financial burden if you’re not careful. Personal injury claims, discrimination suits, breach of contracts, and disputes with employees can all cost you thousands of dollars if you are found liable.

Larger companies would be wise to consider customizing their standard business insurance to include an umbrella liability insurance policy. This type of policy provides an extra layer of financial security during lawsuits with heftier fines.

Having business insurance also helps establish your credibility and provides your clients with peace of mind. This also helps you in contract negotiations with some clients.

Ultimately, knowing your business is covered in the event of an unexpected loss or damage will make you feel more confident and protect your reputation.

Protect Your Business with KASE Insurance

It pays to be prepared. While it may not be illegal to launch your business without an insurance policy, it is highly encouraged. You deserve to secure your business’s future and your finances. You want to be protected in case of a calamity, claim, or lawsuit.

At KASE Insurance, we provide our clients with comprehensive insurance packages catered to their specific needs. Our industry experts know the ins and outs of your profession. We’ll work together to find an insurance policy right for you.

If you would like to discuss your business insurance options, get in touch with us today and speak to an experienced broker who will be happy to assist you.

You can also call us now for a quick quote.