10 types of small business insurance in Canada

Starting and running a small business in Canada is exciting, but it also comes with risks. Whether you’re managing a startup or a growing enterprise, unexpected events can disrupt operations, lead to financial losses, and sometimes put the entire business at risk.

This is where the right business insurance becomes essential.

With a well-rounded insurance plan, you can protect your business from a variety of common risks—everything from property damage and customer injuries to data breaches and product liability issues.

Here’s a simplified guide to the top 10 types of business insurance every small business owner should consider, providing peace of mind and a safety net when you need it most.

1. General Liability Insurance

What it covers: Protection against claims of bodily injury or property damage that your business might cause to others.

Why it’s important: Accidents happen, and if someone gets hurt on your premises or you accidentally damage someone’s property, you could be held liable.

Example: A customer slips on a wet floor in your store and breaks their arm. General liability insurance would help cover their medical expenses and any legal fees if they decide to sue.

2. Commercial Property Insurance

What it covers: Your business’s physical assets—like buildings, equipment, inventory, and furniture—against damage or loss from events like fire, theft, or vandalism.

Why it’s important: Replacing damaged or stolen property can be costly. This insurance helps you recover without a significant financial burden.

Example: A fire damages your office and destroys valuable equipment. Commercial property insurance would help pay for repairs and replacements.

3. Professional Liability Insurance (Errors & Omissions Insurance)

What it covers: Protection against claims of negligence, mistakes, or failure to deliver services as promised.

Why it’s important: If your advice or services cause a client financial loss, they might sue you. This insurance covers legal fees and damages.

Example: An IT consultant’s software recommendation leads to a client’s data loss. Professional liability insurance would cover the legal costs if the client sues.

4. Product Liability Insurance

What it covers: Protection against claims that a product you sold or manufactured caused injury or damage.

Why it’s important: Even with quality control, products can have defects. This insurance shields you from the financial fallout of lawsuits.

Example: A toy you sell has a defect that injures a child. Product liability insurance helps cover legal fees and any compensation awarded.

5. Cyber Liability Insurance

What it covers: Costs associated with data breaches, cyberattacks, and other cyber incidents, including customer notification and legal expenses.

Why it’s important: Cyber threats are increasing. If sensitive data is compromised, you could face hefty costs and reputation damage.

Example: Hackers steal customer credit card information from your website. Cyber liability insurance helps manage the crisis and covers associated costs.

6. Commercial Auto Insurance

What it covers: Vehicles used for business purposes, protecting against accidents, theft, and damages.

Why it’s important: Personal auto policies often exclude business use. This insurance ensures you’re covered during work-related driving.

Example: An employee gets into an accident while delivering goods. Commercial auto insurance covers repair costs and liability claims.

7. Directors & Officers (D&O) Liability Insurance

What it covers: Protects company leaders from personal losses if they are sued for decisions made on behalf of the company.

Why it’s important: Directors and officers can be personally liable for their actions. This insurance attracts talent by offering protection.

Example: A stakeholder sues your company’s board over mismanagement. D&O insurance covers defense costs and any settlements.

8. Business Interruption Insurance

What it covers: Loss of income and operating expenses if your business is temporarily closed due to a covered event.

Why it’s important: Bills and payroll continue even if your business can’t operate. This insurance helps you stay afloat.

Example: A storm damages your shop, forcing you to close for repairs. Business interruption insurance compensates for lost revenue.

9. Crime Insurance

What it covers: Losses from criminal acts like theft, fraud, or forgery committed by employees or outsiders.

Why it’s important: Crimes can result in significant financial losses. This insurance provides a safety net.

Example: An employee embezzles company funds. Crime insurance helps recover the stolen money.

10. Legal Expense Insurance

What it covers: Legal costs from disputes related to contracts, employment issues, tax matters, and more.

Why it’s important: Legal fees can be high, and even small disputes can become expensive. This insurance ensures you can afford proper representation.

Example: You’re involved in a contract dispute with a supplier. Legal expense insurance covers your attorney fees.

Before diving into raising additional funding, it’s essential for every business to have a solid insurance foundation. Business insurance not only protects you against potential setbacks but also strengthens your credibility with investors and lenders who want assurance that their investment is secure.

By covering your bases with the right insurance, you’re building a resilient business ready to thrive and grow with confidence.

Don’t leave it to chance—ensure your business is protected today so you can focus on expanding tomorrow.