Asking the right questions can help businesses take advantage of buyer-friendly market
The commercial insurance market in Canada has transitioned into a more buyer-friendly position after a difficult period from 2020 to 2023. One of the best signs of a highly competitive market is the number of insurers offering commercial insurance products in Canada. According to data from MSA Research, the number of insurance companies actively competing in the commercial market increased by 10% over the past few years, and rates have stabilized as more capacity has returned.
According to a recent report by Marsh LLC, a global broking and risk advisor, commercial insurance rate changes at renewal in Canada declined 3% in the third quarter of 2024.
Many small and medium-sized businesses faced unique challenges in securing affordable coverage in the last few years. But even though the market has improved, keeping a focus on risk management can deliver long-term savings on your commercial insurance policies.
Insurers are looking for growth opportunities with a particular emphasis on well-performing risks, and Canada is an attractive market for both domestic and global insurance capital.
If you have questions about your commercial insurance policy or are looking for risk management advice, shop around for a commercial insurance representative or broker who understands your type of business and is willing to invest the time and effort to understand your specific needs. A proactive insurance agent or broker is a valuable asset for any business owner.
To assist you and your business in navigating the insurance landscape, here are eight questions to consider.
1. What kind of insurance do I need?
Every business is different, and you have many insurance options available. There are numerous types of insurance for small businesses, including coverage for property damage, legal liability, business interruption, crime, specialty risks and cyber risks.
If you act as a consultant or offer professional advice or services to clients, you may also want to consider errors and omissions or professional liability coverage. If you have a business vehicle, it will require a commercial auto insurance policy. Finally, as cyber threats increase and criminals become more sophisticated, it’s more important than ever for businesses and organizations to take proactive measures to help protect themselves from cyber attacks and breaches, including through cyber insurance.
You have many different coverage options, so reach out to an insurance professional for advice and information. They can help determine the risks specific to your business and recommend coverage solutions.
2. What steps can I take to manage my premiums?
Work with an experienced commercial insurance professional, broker or agent that specializes in your business type to best position you for customized coverage at competitive rates. Begin your renewal process well in advance of the policy expiry date and, with enough lead time so you can ask for quotes from multiple insurance providers to compare coverage options and pricing. This will help ensure you get the best value for your premiums. Insurers may also be able to reduce your premium if you increase your deductible or change your coverage limits.
Consider bundling various policies, such as liability and property insurance, with the same provider to secure discounts. And remember, new and innovative solutions are becoming available all the time, so review your policy at least annually and anytime you make major changes to your business operations.
3. How are business insurance rates determined?
Commercial insurance is complex. When calculating a business insurance premium, insurers consider many factors such as the type of business you run, the type of products you make or sell, and the risk management strategies you have in place. Make sure you have an insurance representative who understands your business, its risks and insurance requirements. They can help you choose suitable coverages.
4. What is a deductible and how does it affect my premium?
The deductible is the portion of a claim that you would have to pay out of pocket. The higher the deductible, the lower the premium (the cost of your insurance). Compare premiums that have different deductibles, then decide whether the lower premium is worth the higher amount you would have to pay out of pocket if you need to make a claim. The deductible you choose depends on how much you can afford to pay for or are willing to contribute to a loss.
5. What does business interruption insurance cover? Do I need it?
Business interruption insurance covers what your business would have earned during a period of closure due to an insured loss, and it can even cover any continuing expenses. For example, if your auto repair shop shuts down because of an insured loss such as a fire, your insurance would cover the revenue you would have expected from repairing cars during that period.
Business Interruption is an optional add-on to your existing commercial property insurance policy. You can choose from three types:
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.
A “profits form” policy which continues to pay until your business resumes its normal, pre-interruption level, subject to limits.
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.
6. Will my homeowner’s policy cover my home-based business?
If you’re working out of your home, don’t assume your business will be covered under your personal home insurance policy. You may need business insurance, depending on the type of business and your revenue, how much stock you store in your home and whether customers regularly visit your home.
Liability is perhaps the greatest risk with a home-based business. For example, most businesses provide some product or service for which they are liable, or a customer may slip and be injured on your icy walkway while visiting your home business location. Commercial liability insurance will cover legal costs to defend you in a liability lawsuit and cover damages brought against you. The personal liability portion of your homeowner’s policy typically will not provide coverage for such events.
7. What is a risk management plan? Does it impact my insurance premiums?
When planning your insurance coverage, an important step to take – with the help of your insurance representative – is to identify potential risks that could critically threaten your business, and insure against them. A risk management plan will identify and analyze the possibility of financial loss that an organization or entity faces due to a particular peril affecting something they value, examine the feasibility of alternative risk management techniques, select and implement the best risk management technique and monitor the program.
Managing risk is an essential part of every business, large or small. From theft to cyber breaches, you need to be ready for a host of risks that could come your way. Taking the time to understand your risks and putting a robust risk management strategy in place will not only help protect your business from preventable losses, but it can also help reduce your insurance costs. If you have risk mitigation plan in place, make sure your staff are aware of the plan and that you share that information with your insurance provider. A detailed risk management plan can help  with lowering your premium.
8. What resources are available if I have additional questions?
A licensed insurance professional can help you navigate the options available to protect you and your business. Insurance Bureau of Canada (IBC) also has insurance representatives who can answer general insurance questions and point you to other helpful resources for more specific information. Check out IBC’s website at ibc.ca or contact IBC’s Business Insurance Helpline at 1‑844-2ask-IBC (1-844-227-5422), if you need help understanding business insurance coverage. You can also download this document to keep as a resource for those times you may have questions about your commercial insurance policy.
No matter how well you plan, operating a business comes with an element of risk and unpredictability. Your commercial insurance policy should be able to provide peace of mind, as long as you understand the coverage you have purchased.
