Types of Business Insurance Coverage

Types of business insurance

• Commercial property

  Commercial property insurance protects your business’ physical assets against loss or damage related to multiple causes including severe weather events and vandalism. You can insure a broad variety of business property, including:

  • computers and electronics

  • customer property at your business site

  • employees’ personal property while on-site

  • plant and equipment

  • fencing and landscaping

  • stock and inventory

  • leasehold improvements

  • office furniture and fixtures

  • outdoor signs

  • tools and equipment in transit or used off-site for business purposes

  • glass breakage and windows

  Your insurance representative can confirm what’s specifically covered by your commercial property policy and advise about optional add-ons.

• Condominium/strata corporation’s insurance

  In today’s economic climate, some strata/condominium corporations face challenges in both finding and maintaining affordable insurance for their properties. While most corporations typically excel in how they deal with their residents and in other administrative aspects of property management, sometimes they need additional guidance in understanding the ins and outs of their insurance policy.

  Below are some helpful tips that strata/condominium corporations should consider to secure and maintain an insurance policy for their property.

  Get the right guidance when looking for an insurance policy

  1. Consider using the services of an insurance professional.

  In their search for an insurance policy, strata/condo corporations can often benefit by getting guidance from an experienced insurance professional. Brokers and agents are best suited to guide organizations through the process of securing insurance and ensuring they have the right policy for their circumstances.

  2. Pick the right insurance professional for your condo corporation.

  Look for a combination of education and experience. Consider the background of a potential broker or agent, as well as the capability of the company or companies they represent. Pre-qualify your broker or agent with a conversation about their credentials– ask a lot of questions about their education, commercial insurance experience and their organization’s capabilities.

  3. Specialized experience matters.

  Your broker or agent should understand the complexities of the strata/condo act in the province where they operate and understand the unique risks that a strata/condominium corporation faces when it insures the building compared to unit owners insure the inside of their individual units.

  A good rule of thumb is that a broker or agent should have at least fi¬ve years’ experience working in commercial insurance and approximately two years as a strata/condo corporation specialist. The right broker or agent should have a licence (mandatory for all practicing insurance brokers and agents) and a combination of education designations such as:

  • Canadian Accredited Insurance Broker (CAIB) – first level for an insurance broker

  • Canadian Certified Insurance Broker (CCIB) – top level for an insurance broker

  • Chartered Insurance Professional (CIP) – first level for an insurance professional

  • Fellow, Chartered Insurance Professional (FCIP) – top level for an insurance professional

  • Canadian Risk Management (CRM) designation – first level for a risk manager

  • Certified Risk Management Professional (RIMS-CRMP) – top level for a risk manager

  • Associate of the Canadian Condominium Institute (ACCI)

  Maintain your property and your policy

  Many organizations pick a great broker or agent to help them find insurance, or ¬find the right policy for their property on their own, but then don’t have a plan to ensure they do what’s needed to maintain their policy.

  Here are a few tips for strata/condominium corporations to consider once they’ve secured or renewed an insurance policy.

  1. Make risk management a priority.

  Finding the right policy is just the start. Insurance is about risk, and the board of your condo or strata will need to act like risk managers in caring for the property and managing its insurance. When in doubt, hire a risk management consultant to help identify potential risks respecting the property. It can save money in the long run.

  2. Appoint a senior strata/condo board member to manage the insurance policy and all insurance-related issues.

  The condo corporation can determine internally who gets picked to manage the insurance, but it makes the most sense that a senior member of the strata/condominium board (particularly the chair or treasurer) be designated as responsible for managing the property’s policy.

  In many cases, a corporation will designate the property manager to monitor the insurance; however, a senior member of the board is often the better choice. The chair or treasurer will have a handle on the property’s finances and whether damage should be paid for out of the building’s reserve fund or if the policy should be called upon to respond.

  3. Don’t use insurance to address common maintenance repairs.

  A well-maintained property will have significantly lower insurance premiums. In some cases, condo corporations have submitted many small claims to their insurers within a relatively short period of time, and this elevated use of their policy has resulted in increased insurance premiums at the time of renewal.

  In these cases, the corporation essentially used their insurance company as a repair contractor. While it may appear to be cheaper in the short term, it may cost the corporation more in the long term, through significantly higher premiums.

  • Managing Water Risk in a Strata/Condo/Rental Property

  • 8 Steps to reduce your rental property insurance costs

• Commercial vehicle insurance

  Regardless of where your business is located, purchasing auto insurance is mandatory across Canada. Beyond securing the mandatory coverage set out by each province and territory, you can select additional commercial vehicle coverage for owned or leased cars, trucks or fleets of vehicles used by your business. Knowing your responsibilities for can help you confirm adequate coverage.

  • Your responsibilities as an employer. Whether a vehicle is owned by a company or an individual, when it’s used by employees and/or volunteers for business purposes, there are potential risks.

  • Be aware of your vicarious liability as a business owner. This means that you’re generally responsible for the negligence of employees and/or volunteers when they operate a vehicle or equipment on behalf of your organization.

  • Your compliance responsibilities. There are federal, provincial and territorial regulations and mandatory coverage requirements for using vehicles to conduct business operations. Additional local government regulations and legislation may apply. Examples include:

    • The Motor Vehicle Safety Act which sets out standards and inspection requirements for all vehicles and equipment in Canada.

    • Transport Canada's National Safety Code regulations for commercial vehicles, drivers and motor carriers that apply to all persons responsible for the safe operation of commercial vehicles.

  Because a vehicle collision could be a major loss for many businesses, managing risks may add up to:

  • fewer claims

  • less severe or costly losses

  • lower insurance premiums in the long run

  Your insurance representative can provide more information about coverage options for your commercial vehicle insurance and/or fleet liability coverage.

• Business interruption

  Your business’ ability to generate sales could be threatened at any moment. With business interruption coverage, you’d collect the income you expected to be generated from doing business during repairs and shutdown. Here’s how business interruption (BI) works:

  • Business Interruption is an optional add-on to your existing commercial property insurance policy. If your business needs to shut down due to a covered peril, BI covers continuing revenues or replaces lost profits. You can choose from three types:

    1. A “gross earnings” policy which pays only until property or stock is replaced or damage is repaired. This helps maintain cash flow when damaged stock or inventory is unsellable.

    2. A “profits form” policy which continues to pay until your business resumes its normal, pre-interruption level, subject to limits

    3. An “extra expense” policy for businesses that can continue to operate during periods affected by loss and/or damage. For example, it could cover the cost of moving to a temporary location while your premises is repaired.

  • While BI polices are not standardized, most indicate that the insurer will pay for the actual loss of “business income” due to the “necessary suspension” of operations during “the period of restoration”. Important elements to understand are:

    • The “physical damage requirement” which means there needs to have been physical damage such as from explosion, wind, fire or firefighting efforts covered by your commercial property to trigger BI coverage. Note that an interruption due to a loss of data or utilities may not be considered a physical loss. Separate utility loss coverage may be available.

    • Defining the “period of indemnity”– also known as the period of restoration – is important if BI coverage is triggered. Most policies pay for lost income until the business is restored or when the coverage expires – usually 12 months from the start of the interruption.

• Home business insurance

  Operate a small business from your home? A separate home-based business insurance policy can specifically protect your home-based business. Here’s what’s important to know about insuring your home business.

  • If you decide to run a home-based from your home, you must inform your home insurer of the business on premises. Know that:

    • most homeowner’s policy only offers a small coverage limit for books, tools and instruments necessary for a business, profession or occupation only while the items are in your home.

    • if your work takes you away from home, your equipment may not be covered under a homeowner’s policy. Any products, equipment or supplies that may be stolen from or damaged while in a vehicle won’t be covered under your personal auto or home insurance policies. Ask your insurance representative about additional coverage options.

  • Liability is perhaps the greatest risk with a home business. Commercial liability insurance would generally cover you against amounts you are legally obligated to pay for bodily injury or property damage to others and would pay the legal costs to defend you in a lawsuit. Personal liability on your homeowners policy would typically not cover such situations.

  • Your professional liability isn’t covered under a home insurance policy. If you’re paid to give professional services or advice, you need professional errors and omissions insurance.

  • Work with your insurance representative to determine the types of coverage you need to protect your business. Do this as soon as you register your business and continue to do so as it grows. As a business owner, it’s your responsibility to manage risk. You can minimize potential losses by answering these questions:

    • What can go wrong?

    • What will I do to prevent the harm from occurring and respond to the harm or loss?

    • If something happens, how will I pay for it?

• Professional liability

  If you’re paid to provide professional services or advice, you may need professional liability – also known as errors and omissions – insurance. It would cover damages and defence for financial loss or bodily injury claims arising from acts of professional negligence such as:

  • giving a client professional advice that’s inaccurate or incomplete and the client’s business suffers as a result

  • services provided by one of your employees, who’s a professional technician, leads an individual being Injured

  • an employee, who’s a trained psychologist, speaks to a teen who calls your non-profit’s teen crisis hotline. Subsequently, the teen harms themself and their family sues your organization

  Such insurance will cover you if you provide a service – such as hairdressing or dog grooming – that goes awry and causes damage or injury. This kind of insurance may be offered through professional associations.

  It’s important to know definitions of 'professional' can vary. Understand or ask your insurance representative about how your insurer defines professionals and know that:

  • your organization should consider securing professional liability coverage to ensure that the personal interests of corporate employees and volunteers who act as professionals in their duties for you are covered

  • depending on the programs and services offered by your non-profit or registered charity, certain types of professional liability insurance may be required

• Cyber insurance

  Online business activities and home-based employees are elevating the risks of data breaches and cyberattacks. Data is likely your most valuable business asset and you need to do everything you can to protect it. Cyber insurance can cover a range of cyber events, including:

  • Data confidentiality breaches. The loss of, unauthorized access to and/or disclosure of confidential or personal information.

  • Cyber extortion. A demand for payment under threat of causing harm to your data – such as disabling your operations or compromising your confidential data.

  • Technology disruptions. A technology failure or denial-of-service attack.

  Remember most data breaches and successful cyber attacks are due to human error or inattentiveness to good cyber security.

  This coverage can help cover costs resulting from cyber events such as:

  • legal and civil damages

  • security breach remediation and notification

  • forensic investigation

  • computer program and electronic data restoration

  Cyber insurance products are provided in one of three ways:

  1. Stand-alone cyber insurance policies – specifically for cyber risks – are the most common cyber policies in Canada, the United States and Europe.

  2. A traditional property and liability insurance policy which may include some coverage for certain cyber events. These policies typically have very low limits that would not cover the full cost of a breach or cyberattack.
     
     Note that many traditional policies don’t specifically refer to cyber risks. If your business is vulnerable to cyber risks, don't rely on a traditional commercial property or liability policy. Talk to your insurance representative about what kind of cyber insurance solution suits your specific needs.

  3. Endorsements – also known as riders – which can be added to traditional commercial insurance policies to add limited cyber coverage.

  It's critical to do as much as possible to protect your business from cyber risk, while being prepared for the worst-case scenario.

  Speciality insurance coverage for cyber risks is relatively continually evolving. Speak to your insurance representative to find the coverage you need to reduce your cyber risk.