Business Insurance: Risks for Business Owners


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You own a business. You may be running your business professionally but, no matter how careful you are, bad things happen. Every business has risks. I’ll show you some of the risks you’re exposed to and what you need to do to protect yourself from those risks. 

Business Risk: Property Damage

One thing you may face as a business owner is loss or damage to property. Fire, theft, natural disasters and other events can seriously impact your business’s ability to operate normally.

Ways to Protect Yourself: Property Insurance

Your best line of defence against the negative effect of property theft or damage is property insurance. Ensuring that you have the right property insurance in place to repair, rebuild or replace your property in order for your business to resume normal operation is crucial for your business’s survival and continuity. This can include but is not limited to, the building itself, your equipment and your stock. 

Business Risk: Business Interruption

You may face the loss of business income when there is physical damage or loss to your business property. You may incur a loss of business income due to uncontrollable interruptions in your business operations. You may also lose your employees as a result. 

Ways to Protect Yourself: Business Interruption Insurance 

Business interruption insurance will pay for your loss of business income until you resume normal operations. Depending on the type of coverage you choose, it will also pay for the standing charges that you incur while you wait to resume normal operations such as rents, wages and salaries, utilities, and interests on loans. It can also pay for additional costs in excess of normal operating expenses that you incur in order to continue operations, such as the cost of leasing a temporary location or equipment. 

Business Risk: Liability

There are many types of liability coverages. Here are a few of the most common. 

Risks Associated with Business Premises, Manufacturing, Retail & Contracting

If you own or operate a business premises you face the constant risk of being sued by third parties if they are injured on your premises, such as slip and falls due to a slippery floor or parking lot. 

If you are a product manufacturer, wholesaler or retailer, you face the risk of customers seeking legal recourse if you produce or sell a faulty or unsafe product that causes property damage or bodily injuries to customers. 

If you are a contractor doing construction or installation services, you face the risk of your customer and other third parties suing for property damage or bodily injury if they are caused by you, your employees or your contractor. You are at risk not only while performing the work, but also after the project has been completed. 

For example: 

A ladder that is being used by you or your employees for building construction or renovation falls and damages a parked car. 

Or you’re a plumber and while fixing a water pipe for a client, you cause the client’s building to flood resulting in water damage to the client’s building, contents and loss of income due to business interruption. 

Or maybe you’re a signage company and a building sign was installed incorrectly by you or your employees and it falls and injures a third party after the work is done. 

You can get sued for substantial financial damages in any of these scenarios. 

Risks for Professional Service Providers

If you are a professional services provider such as an engineer, accountant, consultant, IT technician or web developer, you face the risk of customers seeking legal recourse if your service doesn’t meet expectations and results in a financial loss to your customers. This can include things such as an engineer providing defective designs, an accountant providing inaccurate financial advice or information, or an IT technician doing an improper computer system setup. 

Risks for Directors and Officers of Organizations

If you are a director or officer of an organization whether it’s a family-owned business, charity group, religious or educational institution, or community association. When something goes wrong and your organization faces a lawsuit for things such as wrongful dismissal, breach of bylaws or health and safety regulations, mismanagement of funds, or negligence of duties you may be held personally responsible to the point that your resignation or organization’s indemnity may not be enough. 

Cyber Risks

Did you know that more than one-fifth of Canadian companies were hit by cyberattacks in 2017? As businesses continue to embrace the internet and digital technologies, most businesses are storing their business information and their client’s personal and financial information on their computers – this leaves them constantly exposed to cyber risks. If your business gets hit by a cyberattack, you are not only facing theft of money or a demand for ransom, you will also face legal recourse from your clients if you fail to safeguard their personal or financial information. You will also face a loss of revenue if the cyber attack causes a business interruption or reputation damage to your business. 

Ways to Protect Yourself: Commercial General Liability, Professional Liability, Directors and Officers Liability and Cyber Insurance. 

These are some of the important insurance coverages that business owners should consider. A good insurance broker will help identify the risks associated with your business and will advise you on the coverage you will need. These can be very unique depending on your type of business. The more you can do to protect the business you’ve built and love, the better.

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Have questions about insuring your business?

Want to learn more about finding the right commercial insurance policy for your business? Watch the next part of our video series.