Your small business didn’t pop up overnight. Careful planning, investment, and a lot of hard work got your company off the ground, and as your venture grows, you’ll accumulate more assets that call for small business insurance protection. The question is: are those assets truly protected, or are you more exposed to a loss than you think?
The answer often comes down to the type of coverage you have. No matter the size of your small business, the gains you’ve made, or the industry you operate in, you will face risks. Managing those risks is important, but you’ll need a solid safety net in case a legal, financial, or environmental emergency threatens to sideline your operations and drain your assets.
If you know all about the coverage your small business needs – that’s great! We’ll work up a customized quote for you right now. If you’re not yet clear on how best to protect your company, here’s how five key types of small business insurance can come to your rescue when you need them most.
1. Commercial general liability insurance
What is it? As a small business owner, you can be found responsible for damage and injuries that occur to others (and their property) when you’re doing business. This is liability, and it’s not always possible to escape – even businesses that have done no wrong may find themselves tangled up in a liability lawsuit.
Commercial general liability (also known as CGL) insurance is important to have when someone brings legal action against your business. This type of small business insurance is designed to protect your business if you’re found legally responsible for losses that result from your product or service causing bodily injury or property damage to a third party.
Why do you need it? Losses can happen suddenly, and the damage can be severe. Whether you manage your own candy shop or your design consulting business takes you out and about, you should be financially prepared if things go awry. After all, accidents happen – no matter how well you run your business – and can lead to lawsuits.
When can it help? A CGL policy springs into action when someone sues you after getting injured or suffering property damage. If a slip on the icy steps outside your storefront leads to a customer’s broken wrist, or one of your employees broke a piece of furniture during an offsite catering gig, your company could face costly legal expenses. The lawsuit is what matters: whether or not you agree that your company was at fault, any lawsuit brought against your company will need to be resolved.
What happens if you don’t have it? If you roll the dice and operate without a CGL safety net, you could run into any number of expensive worst case scenarios. For one, if a judge finds your business legally responsible for injury or damage to a third party, you may have to cover the costs associated with the legal process as well as any losses that stem from the lawsuit. Of course, there’s also your reputation to worry about: a poorly-handled lawsuit can diminish your professional standing, alienating your customers.
2. Product liability insurance
What is it? Product liability is typically part of your CGL policy, but it’s worth explaining the specific nature of the coverage. It involves your responsibility to customers, vendors, and others you may deal with as you do business when your product has caused bodily injury or property damage to a third party.
Many things can lead to a problem with your product, but three common causes are design defects, manufacturing defects, and marketing defects. When these product defects result in bodily injury, illness (often as a result of contamination), or property damage, you could face a lawsuit.
Why do you need it? Whether you sell food, clothing, accessories, or devices, your company can suffer when your product doesn’t measure up. In fact, the minute you start selling a product, your company is at risk of product liability claims from unhappy customers – which can lead to costly and time consuming lawsuits.
When can it help? If a bad batch of cookies leaves patrons writhing in pain or an unfortunate typo on a stack of posters has your client fuming, you could be responsible for paying the damages. But product liability claims apply to business-to-business as well as business-to-consumer operations: if you sell your product (be it household devices, power tools, or heavy equipment) to other business owners, you’re open to the same risk.
What happens if you don’t have it? Without product liability coverage, you may be leaving a substantial gap when it comes to your small business insurance. When a problem or loss is traced back to your product, you could be hit with a hefty expense: after all, the rest of the product must be recalled or destroyed, new product will need to be made, and you could face a lofty liability claim (especially if the product problem impacted more than one customer). Product liability won’t extend to your product recall costs, but it can help shoulder the burden of your legal expenses.
3. Commercial Property insurance
What is it? As the name implies, commercial property insurance covers your workplace – and a long list of things inside and out. No matter the type of business you run, your brick and mortar structure (whether it’s a space you own or lease) plus assets like equipment, inventory, furniture, and electronics will need to be protected from fire, flood, or property damage.
Why do you need it? Property loss can be a big setback: not only will you have to find the funds to replace or repair your damaged goods, but you’ll have to quickly find a way to continue your work – or suffer the consequences of business interruption. However, with the right insurance you won’t have to cover the entire cost of your recovery efforts – maybe it’s time to consider a policy update.
When can it help? The aim of commercial property coverage is to get you back to business as usual, as soon as possible. When you suffer an insured loss, like a vandalized door or a shattered display cabinet, your property insurance can help get the repairs done quickly. And if your loss calls for replacement instead of repair (imagine a fire taking out the equipment in your bakery), commercial property insurance can help you cover those replacement costs.
What happens if you don’t have it? Property losses can climb into the thousands fairly quickly, even if your business is small. If an overnight flood drowns everything from your computer system to the floorboards themselves, you could lose your savings to replacement costs and your revenue to interrupted business operations. Without some financial support, your business could be in deep trouble.
4. Professional Liability insurance
What is it? Also known as technical errors & omissions (E&O), professional liability insurance serves to protect businesses in case a problem with your service results in a lawsuit against your business. When you work in professional services like software development, web design, management consulting, or health and beauty, an error or omission in your work can have big (and costly) consequences.
Why do you need it? Litigation is on the rise¹, as more customers than ever before are ready to sue over a problem with their transactions. As a professional who provides a service, you’re vulnerable to certain risks, and simply living with that knowledge can be stressful. Professional liability insurance can give you peace of mind, knowing that you’re protected in several circumstances involving a slip-up at work.
When can it help? Several common situations can call for professional liability coverage. If your mistake results in a financial loss for your client, they could come to you for compensation. If you happen to overlook a critical detail that disrupts the service or finished product you had promised, your customer could sue for damages. And if you do wind up in the midst of a lawsuit, professional liability coverage can help with the associated legal costs.
What happens if you don’t have it? If you don’t have this coverage, the cost of the lawsuit and any lost income while your operation is interrupted can quickly overwhelm your small business. E&O insurance can help handle the legal fees, which should relieve some of the financial burden.
5. Cyber insurance
What is it? Companies that rely on data and technology are exposed to cyber risk – and it’s getting worse each year. An astounding 45% of small business owners have been victims of a cyber attack without knowing it, and only a quarter of companies are well prepared for such a situation. Cyber insurance can help cover some of the loss that data breaches, hacks, and malware can bring.
Why do you need it? Cyber risks aren’t new, but they’re becoming more sophisticated. Cybercriminals are able to hijack data more quickly and easily, and recovery efforts can be a long and drawn-out affair. Notifying customers of their stolen data is difficult; restoring sensitive information and repairing your reputation can take all of your time, money, and effort.
When can it help? If your business operations rely on computers and technology, this small business insurance product is for you. But any type of small business that collects and stores customer, employee, or financial records can make use of cyber insurance when a hacker steals account information from your computer, a virus sidelines your operations, a criminal hijacks your network, or a number of other digital disasters strike.
What happens if you don’t have it? In many cases, small businesses can suffer more than larger companies after a cyber attack. If your notification efforts fall short after hackers made off with your customers’ sensitive information, those patrons may lose confidence in your company – and a dwindling customer base can mean the end of your business. In fact, given the rise in cybercrime, more clients and third party partners are demanding that companies have this type of insurance coverage.
45% of small business owners have been victims of a cyber attack without knowing it.
Not sure if you need to add one, two, or all of these coverages to your small business insurance policy? Reach out for a customized quote! We’ll happily pair you up with an expert broker who can walk you through Northbridge insurance products, and match your business with the right policy.
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¹ 2016 Litigation Trends Annual Survey – Canada. Norton Rose Fulbright, 2016.