Whether your business’ grand opening is just in a few days or you’ve been running your small business for a century, your business must be fully covered. As a small business owner, you know that every penny is important, especially when you’re just starting. Leaving insurance to fall to the bottom of the list can be dangerous.
Suppose you experience a costly loss in your startup stage without insurance coverage. You may not be able to afford the financial attachments of the loss and continue running your business.
Maybe you’re asking, “How much is general liability insurance for small business?” or “Isn’t insurance super-expensive?” It doesn’t have to be if you go about it the right way. This post provides insight into the factors that answer how much is general liability insurance for small business in Canada.
Want to know how much is general liability insurance for small business? This post highlights what business insurance is, what business insurance covers and doesn’t cover, general liability insurance and why you need it, how much is general liability insurance for small business, and how to get the most affordable and suitable coverage for your business.
What is Business Insurance?
We can’t fully answer how much is general liability insurance for small business without discussing what business insurance is. Business Liability Insurance (Business Insurance), also called Commercial General Liability Insurance (CGL) or Commercial Insurance, protects business owners from liabilities due to unforeseen events during business operations.
There are several types of insurance available for business owners. Some of them are errors and omissions insurance, commercial property insurance, and general liability insurance. The type of coverage you choose depends on factors like your industry, size, and income.
Your business insurance is a contract between your business and an insurer. The agreement essentially states that you will pay premiums, and the insurance company will help you repair, replace, or recover your business’s covered properties if they ever get stolen, misplaced, or damaged.
Think your business doesn’t need it? Think again. Insurance coverage is vital to save your business from all sorts of nasty stuff that happens almost every day. What are they? We are about to discuss that. Read on!
What does Business Insurance Cover?
Business insurance is a broad term that describes the common types of insurance business owners need to cover third-party liability claims.
Some of the business insurance policies are:
- Commercial General Liability Insurance (CGL)
- Directors and Officers Insurance
- Product Liability Insurance
- Commercial Property Insurance
- Cyber Liability Insurance
- Professional Liability Insurance
Now that we know what business insurance covers, let’s look at the other side- what it does not cover.
What does Business Insurance Not Cover?
Business Insurance covers incidents involving third-parties, but it does not cover bodily injuries done to you and your employees. You will need a specialized type of coverage to cover these types of bodily injuries. It also does not cover intentional criminal acts, contractual liability, cost guarantees, or cost estimates. Neither does it cover damages done to your tools or property.
For example, if you are a contractor and drop a saw off of a ladder and break it or if an earthquake destroys your office, your contractors’ commercial general liability insurance will not cover the damages.
Also, general liability policies explicitly exclude losses you incur because of the internet. These are losses from data breaches, denial of service attacks, e.t.c. However, a good cyber liability policy can pick up where your general policy stops and leave you protected.
Who Needs Business Insurance?
Before we fully discuss how much is general liability insurance for small business, let’s know who actually needs business insurance. Earlier on, we mentioned why your business needs business insurance. Do you still have doubts? Perhaps you think your business is too small to get bothered with this. Well, regardless of the size of your business or your industry, you need insurance for your business’s long-term survival.
Although business insurance is not a compulsory requirement to run a business, it can protect your business from financial costs associated with claims(e.g., medical bills, legal fees) that may otherwise jeopardize your business’s survival.
Now, we can agree on something- YOU NEED BUSINESS INSURANCE! But how do you know the kind of coverage that suits your need? Let’s answer that next.
What Type of Business Insurance Coverage do You Need?
Before you purchase a policy or start to worry about how much is general liability insurance for small business, let’s discuss a few of the basics you’ll cover:
- Liability Coverage: It protects you if you get sued. It doesn’t matter if you’re a nail art salon or a bubble wrap factory; one accident could paralyze you with medical expenses and legal fees.
- Property Insurance: Commercial property insurance protects the building and everything it contains, whether it’s from an employee mistake or a hurricane occurrence.
- Workers’ Comp: It makes sure your business follows the law. Your employees must be protected in case of injury or illness suffered as a result of their work.
- Umbrella liability: Commercial umbrella liability insurance gives your business extra liability coverage above your commercial general liability insurance policy. The goal is, so you don’t have to worry about having to pay out of pocket for liability claims when it exceeds your primary policy’s coverage limits.
- Directors and officers liability insurance: Directors and officers of companies and non-profit organizations (NGOs) usually have a lot on their plates. Bankruptcy, wrongful dismissal, bankruptcy, etc. are among a few of the liability situations you might have to deal with.
Directors and officers liability insurance (also called management liability insurance) covers damages resulting from wrongful acts committed while discharging your duties.
They include negligence, errors, and omissions, misconduct, breach of duty, or any other action that could be held against you in your capacity as a director or officer. This policy would cover your legal fees if you have to deal with a lawsuit.
- Errors and omissions liability insurance: If you fail to meet one of your responsibilities as a professional in private practice, it could lead to grave consequences. You could jeopardize both your business’s financial stability and personal assets.
Errors and omissions liability insurance (or professional liability insurance) covers your liability for errors and omissions and negligence that may occur while you’re providing professional services. If a suit is filed against you for damages covered by your insurance policy, this protection would cover your legal fees, whether you’re liable or not.
- Crime: Crime insurance protects your business against several threats that could lead to unforeseen expenses and lost time. They include theft, employee dishonesty, robbery, fraud, and expenses incurred from a crime loss.
- Social Engineering Fraud Coverage: You can add this to your policy to protect your business against loss of money, securities, or other property resulting directly from social engineering fraud conducted by a person posing as a vendor, employee, or client.
Each business is unique. You can speak with an insurance broker to know which policy fits your specific business needs. You should also consider your profession while at this. For instance, in Ontario, accountants must have professional liability insurance to practice.
What is General Liability Insurance?
General liability insurance or business liability insurance protects companies from claims made by customers, workers, or third parties in the event of any sort of physical damages due to
Bodily Injury (BI), Personal Injury (PI), and or Property Damage (PD). Perhaps you’ve heard of a slip and fall? Yes! That’s precisely the type is coverage this policy offers.
General liability insurance provides a financial safety net in the event a business gets sued. The policies are majorly crafted to pay out claims to third parties that get damages due to business operations.
You have the chance to add the following coverages to your policy:
- Liability Insurance
- Liquor Liability Insurance
- Casualty Insurance
- Property Insurance
- Fire Insurance
- Earthquake Insurance
- Group Insurance
- Small Business Insurance
- Custom Insurance
- Health Maintenance Organizations (HMOs)
- Preferred Provider Organizations (PPOs)
- Home Office
- Home Office Insurance
- Health Insurance
- Indemnity Insurance
- Life and Disability Insurance
Why do You Need Liability Insurance for Your Business?
Many people regard insurance as just a formality. They think all they need to do is get the cheapest business policy available, and all is well. This type of thinking is very wrong and can end up very regretful. Look at this. Would you rather spend $150 on a monitor for your business that comes with no guarantee that it will work or perform what it promises OR pay $200 and get these guarantees? Sure, you’ll go for the second option. That is how insurance works too!
A good business Commercial General Liability (CGL) insurance policy may not come with a fair premium, but it’s worth it. You need it to protect you, your workers, your business, and the assets. Remember that not all policies are comprehensive, so it would be best to have a broad coverage. However, the decision lies in your hands.
It would help if you asked your broker about all the available options and compare rates from different insurance companies. The good thing is you don’t have to pay to get liability quotes for companies. So why not spend the extra few minutes and have a fair comparison of figures and coverages. You don’t want to wake up to an insurance claim and discover that you are neither covered nor have enough coverage to compensate the losses the third party has incurred.
The Most Common Types of Business Insurance & Their Costs
- General Liability Insurance
- General liability insurance protects your business from liabilities resulting from you or your employees causing property damage or bodily injury to a third party during business operations.
- It also covers your legal liability as a tenant.
- This coverage is usually required by your customers or your landlord to protect them in case something goes wrong.
- THE COST: How much is general liability insurance for small business? $400+ per year, depending on factors like your yearly business revenue, location, number of employees, and nature of business.
- Product Liability Insurance- It falls under general liability coverage so we can’t answer how much is general liability insurance for small business without mentioning product liability insurance.
- It protects your business from legal action associated with a product your company designed and/or sold.
- Suitable for manufacturing & consumer goods industries, construction, and contractor industries protecting liability from finished operations.
- THE COST: It starts as low as $800 per year and varies based on product type, how many products are sold yearly, where you sell your products, and what the product is used for.
For instance, a company that sells surgical equipment should expect to pay higher insurance premiums than one that sells desk mats. The former has a higher probability of leading to injuries or losses.
- Professional Liability Insurance or Errors and Omissions Insurance.
- It is necessary for professional businesses such as lawyers, architects, doctors & consultants to protect themselves against legal action related to professional work provided.
- Many of the professional liability insurance policies are required by law and union regulations as a level of business insurance coverage.
- THE COST: It costs between $500 to $2,500+ per year, depending on the number of clients/patients and the kind of professional advice being offered.
- Cyber Insurance
- If your business depends on technology to operate, e.g., e-commerce transactions, social media marketing, keeping electronic client records e.t.c, then this coverage is vital.
- Apart from technology businesses, cyber insurance coverage is now more and more seen as a must-have for any business that depends on technology for marketing, payment processing, and payment.
- THE COST: $500+ per year depending on the company’s earnings, number of employees, client records, and cybersecurity level available to protect you against hacks, data breaches, etc. You can’t answer how much is general liability insurance for small businesswithout knowing what cyber insurance costs.
- Commercial Auto Insurance
- If you use a vehicle to transport materials, equipment, tools, or products to different locations, you might need commercial auto insurance.
- If your business owns less than five vehicles, each one would be insured separately, similarly to your personal auto insurance coverage. If you own more than five vehicles, you can insure them as a fleet and enjoy collective pricing.
- THE COST: $1,500+ per year, depending on the type of vehicle you drive, your driving record, where your vehicle is being driven, and the specified use of the vehicle. Commercial auto insurance coverage costs could add to how much is general liability insurance for small business.
- Property Insurance
- Just like you insure your home and personal belongings against fire, water damage, and other types of losses, any business that owns some property will also need this coverage.
- Property can be the physical buildings you own, your business contents, tenants’ improvements, tools, equipment, electronic equipment, stock, and inventory.
- THE COST: $1,500+ per year if you are insuring a building you own. The cost depends on the building’s size, age, location, and uses. If you are just insuring a smaller amount of property, like tools, it can be available for a fraction of the stated price.
Property insurance coverage costs could add to how much is general liability insurance for small business.
- Workers Compensation Insurance Coverage (Legally Required in Ontario)
- WSIB(Workplace Safety and Insurance Board) coverage is compulsory in Ontario for independent operators, sole proprietors, partners, and executive officers of construction businesses.
- THE COST: To calculate your premium for WSIB, multiply your total insurable earnings by your premium rate, and divide the result by 100. You will have to calculate each NC separately if you have more than one NAICS code (NC).
Calculating workers compensation insurance coverage costs could add to how much is general liability insurance for small business.
- Industry-Specific Insurance Policies
Apart from the common types of business insurance coverage discussed above, several more industry policies are tailored to cover the most common risks for that industry. Regardless, no matter the kind of company you own, you need some level of protection.
While there’s no real average cost for business insurance, there are average rates specific to each industry. Your premiums depend on the amount of coverage received, the associated risk, and the number of employees in the company. The insurance company considers all these factors and use them to calculate your premiums.
Generally, a small business could pay as low as $500 per year for business insurance. In contrast, a large company with many employees, products, equipments, vehicles and other assets could pay thousands of dollars for business insurance each year.
How To Calculate How Much Is General Liability Insurance For Small Business In Canada?
To answer the question “how much is general liability insurance for small business in Canada?” it’s essential you know and understand the baseline costs for issuing an insurance policy that potentially gives access to millions of dollars from some of Canada’s top insurance companies.
It doesn’t matter whether your business is a home-based business that just needs general liability insurance to meet a personal insurer’s requirements, or it’s a vastly growing tech company that just landed a huge deal. Your insurance company has to pay people to underwrite, negotiate terms, pricing, conditions, e.t.c. with the broker, prepare the document, and issue it to the broker.
Every top Canadian insurer has to put up capital reserves to offset the potential exposure after issuing an insurance policy. Insurance companies do this to comply with the strict regulatory framework that organizations like OSFI and others actively policied.
A clear and complete understanding of what the business does to generate revenue helps determine how much is general liability insurance for small business. With this knowledge, the insurance company can determine the rate of small business insurance. You’ll also need to provide your annual projected revenue, broken down by your type of business activity, if you have multiple streams of business so that your insurer can know how much activity is anticipated.
The result is a straightforward mathematical equation.
Rate(decided by activity) X Revenue (amount of activity) = Yearly Premium
After establishing this baseline premium, the cost of your deductibles, endorsements, limits, and so on are just factors that you can apply to raise or reduce how much is general liability insurance for small business.
Based on your organization’s activity, working through the calculation above is one great way to know the cost of general liability insurance for small businesses in Canada.
The table below compares annual revenue side by side with the approximate premium for a 1million dollar limit. It offers a rough sense of how much is liability insurance for a small business in Canada.
|Yearly Revenue||Approximate Premium For $1M Liability Limit|
|$0 – $100,000||$350-$1,500|
|$100,000 – $500,000||$1,500-$2,500|
|$500,000-$1,000,000||$2,500 – $4,000|
What Factors Influence How Much is General Liability Insurance for Small Business?
- YOUR BUSINESS’S RISKS
Your industry has the most significant effect on the cost of your policy. Industries that involve risky activities such as heavy lifting, tornado chasing, etc., pay higher premiums, while low-risk industries benefit from lower rates.
For instance, brick-and-mortar retailers are open to the public and are vulnerable to more risk than IT consultants working remotely from home. Both industries would pay different premiums. The table below shows how the industry you work in and the risks impact how much is general liability insurance for small business.
|INDUSTRY||AVERAGE GENERAL LIABILITY INSURANCE PREMIUM|
|Construction & contracting businesses||$825|
|Food & Beverage||$500|
|Media & advertising||$415|
|Finance & accounting||$350|
|Photography & video||$275|
Constructing and contracting businesses, cleaning services, and landscaping businesses have the most significant general liability costs because these industries work with other people’s property. Therefore, general liability policies can cover damage you or your employees cause to someone’s property.
However, the more employees, the more you are going to pay higher rates. If you usually hire subcontractors to complete specific projects, you will probably see a significant increase.
- YOUR BUSINESS’S COVERAGE LIMIT
If you want an insurance policy with higher coverage limits, you will have to pay more than you would for basic coverage. The most prominent general liability policy is the $1 million or $2 million policy. This includes:
- $1 million occurrence limit- While your policy is active, the insurance company will pay up to $1 million to cover any single claim you file.
- $2 million aggregate limit- The insurance company will pay up to $2 million to cover claims you make during the lifetime of a policy (often one year).
Other Factors That Influence How Much is General Liability Insurance for Small Business:
- Your business’s category (i.e., sole proprietorship, corporation, partnership, etc.).
- Your business’s services or goods.
- Your business’s total salary.
- Your business’s day-to-day activities (what your employees do when they’re not going through their email).
- Your business’s total number of employees determines how much is general liability insurance for small business.
- Your business’s properties, such as buildings, vehicles, equipment, tools, supplies, and their values.
- Your business’s sales reports could determine how much is general liability insurance for small business.
- Your business’s location.
How Much is General Liability Insurance for Small Business (Contractors) in Ontario?
Contractors in Ontario face numerous area risks daily, ranging from on-the-job injury to a lawsuit due to poor artistry. Whatever the circumstance is, contractors general liability insurance (CGL insurance) can come in useful for any contractor. CGL insurance, sometimes called contractors liability insurance, will protect you if you or one of your employees makes a mistake that leads to bodily harm or property damage on the job.
Since contractors need insurance to practice in Ontario, you will need to invest in a policy. The question is, how do you go about doing it, and what will it cost you? You’re about to find out:
- Speak to a broker. To get reliable insurance quotes, you will have to tell the insurance broker about your business. They will educate you about the coverages available under a contractor insurance policy and then offer you quotes instantly or send your submission to an insurer.
Averagely, if you are a new business within Ontario, and your gross revenues are under $50k, you can expect to pay around $500 per year for the basic $2,000,000 coverage.
- Calculate the amount of coverage you need. When it comes to contractors general liability insurance, there is no one size fits all policy. Some businesses, e.g., snow plowers, will have a higher limit of $3 or even $5 million snow plow insurance coverage than an average handyman who would be satisfied with the basic 2 million.
If your work involves one to two million dollar industrial jobs, you will need more coverage. But, if you are just sticking to residential properties, you may not need as much coverage. For the latter,’ experts advise going for a $2,000,000 policy.
Note: It protects you if you or one of your employees cause bodily harm or property damage to your customers, but it doesn’t cover any bodily injury done to you or your employees. What does this mean?
If you are working on a job and damage a client’s vehicle or home accidentally, Ontario contractors insurance coverage will cover the costs. If you accidentally drop a brick on a customer’s head, CGL insurance will also cover the medical bills involved. It will also cover you if a competitor claims that you have damaged his or her reputation in a misleading advertisement.
However, if you drop a saw off of a ladder, and it shatters, or a tornado destroys your office, your contractors general liability insurance will not cover the damages.
Tips for Reducing How Much is General Liability Insurance for Small Business
Buy a business owner’s policy (BOP). In the insurance world, sometimes businesses can get discounts by purchasing multiple policies with the same insurance provider. For example, small and low-risk tech businesses can be qualified for a business owner’s policy. A BOP combines business liability insurance and property insurance together at a lower rate.
Pay your complete annual premium upfront. You have the option of paying your general liability policy premium in monthly or yearly installments. It can be tempting to go for smaller monthly payments, but settling in full annually often costs less. Many insurance companies offer annual premiums discounts, so you can save money on insurance rates this way.
Actively manage your risks. If your small business has no past claims, you can expect to pay lower business insurance rates. You can create a comprehensive risk management plan to achieve this. The plan could involve:
- Quick cleanup of liquid spillage.
- Clearing away snow and ice at walkways and entrances.
- Reducing hazards on your premises to the minimum.
- CreatStrict rules for social media posts
- Investing in an effective security system.
How to Make Sure You Have Proper General Liability Insurance
The first thing is to do your research. Many small business owners blindly trust their insurance broker and release their money after seeing an attractive coverage amount and a cheap premium. That approach is WRONG. You should make multiple comparisons from different insurance brokers.
There are thousands of licensed insurance advisors in Canada, and they can all sell you the same policy. Their customer service and intention is what distinguish them. To know the best one for you, follow the approach below:
- Begin by reaching out to at least 2-5 different brokers. Ensure they are licensed and have a good reputation with their regulatory body.
- Be sure you understand the policy’s content. If you find something difficult to understand, you can ask your insurance broker. Another option is to simply put a call to the insurance company that the broker provided you a small business insurance quote from to find answers to your questions.
- When you decide on a quote you like, double-check with the insurance broker for any more opportunity to reduce your premiums.
- If you are still not satisfied with the price, you can contact another broker and request if they can beat down the quote you have received.
- Finally, stay involved with your insurance and always inform your insurance broker of any changes to your business, income, employees, operations, etc.
Following this approach will increase your business’s level of protection.
Fun Scenarios to Explain How Much is General Liability Insurance for Small Business in Canada
As we’ve explained throughout the article, how much is general liability for small business depends on the nature of the business. Sometimes, you may need to purchase different types of additional coverage, depending on the way you run your business. For instance, if your business owns delivery vehicles, you will have to purchase commercial auto insurance coverage.
Although there are no average business liability insurance costs for both small businesses, we can look at these scenarios to be clear:
- A small scale shoe cobbler perched quiet downtown street corner would need to have both property and liability coverage. The two could run at about $1,200 per year. If they have additional employees and need workers’ compensation, those aspects will lead to extra costs.
- A large oil company based in British Columbia (BC) owns wells and large trucks in several locations and many employees. They might pay above $10 million per year for coverage.
- A sole proprietor might pay $500 yearly for general liability insurance, while a small consulting firm could pay over $3,000 per year.
- A sole proprietor who hems clothes in a home office has limited liability concerns compared to a landscape. The landscaper may pay above $15,000 annually due to higher risk.
Frequently Asked Questions on How Much is General Liability Insurance for Small Business
Last-Word on How Much is General Liability insurance for Small Business
Voila! We hope now you can answer the question “how much is general liability insurance for small business? You’ll want to be protected and sufficiently covered under a good general liability insurance policy if (hopefully not) a claim comes your way.
Surely, the last thing you want to hear as a business owner is “Sorry, unfortunately that was not included in your insurance policy”. Nobody wants that. To avoid or totally get rid of that scenario, it’s best to be sufficiently covered under a general liability insurance policy from day one.
Your business’s security is not a formality or a mere regulatory requirement and it’s, therefore, worth all the money you’ll have to pay for insurance. The goal is always to ensure every possible outcome is covered under your policy. If possible, purchase additional coverage to increase your limits. We have answers to more insurance questions, check out our recent posts, and subscribe to our newsletter so you can always get these answers at your disposal.