Business insurance can be a lifesaver
There’s no one-size-fits-all solution
When Frank and Mirella Digenova reopened their butcher shop after a nine-month break, Mirella says she was as happy as on her wedding day. But that day might never have happened if it wasn’t for their business insurance coverage.
The proprietors of Butcher by Nature had spent 13 years in their west-end Toronto location before a fire in October 2011 destroyed the shop.
Rather than waiting for the repairs to be finished, they opted to rent a new location right across the street. “It would have taken too long to get the original place up and running again,” she said.
Since Day 1, Mirella says she has been vigilant about their coverage, including business interruption insurance.
“We always made sure our policy was up to date. Every time we would get a new piece of equipment or update something we would add it to our policy,” she said.
Even with that, she says there are always questions you need to ask a broker.
“When you say replacement value, for example, does that mean with depreciation factored in or not? I’ve also learned a lot since the fire, like the need to keep employees’ wages protected so they don’t end up finding another job. These things can put everyone in a bind,” Mirella said.
When it comes to choosing your insurance package, there are a wide range of options for small business owners.
“Your choices often depend on the nature of the business,” said Pete Karageorgos, director, consumer and industry relations, for the Insurance Bureau of Canada (IBC) in Toronto. “A brick and mortar operation in a rented location has different needs than someone providing professional services at a customer’s location.”
One of the most common coverage options in any business policy is a commercial general liability policy. A liability policy protects the owner in case a customer, supplier or vendor claims you are responsible for causing them a loss. If a plumber, for
Your choices often depend on the nature of the business
example, causes a fire when soldering a pipe, the homeowner’s insurance will cover the damages, but may then come back to sue the plumber for those funds. Some liability policies will also cover legal defence costs.
With the flooding, i ce storms and power outages in recent months, more business owners are also paying attention to business interruption insurance coverage.
“It’s an essential part of your business continuity plan. If you have refrigerated goods that might spoil and you go out and buy a generator, or there’s been a fire and have to pay for a temporary location — those would be covered under this type of policy,” Mr. Karageorgos said.
There are also some specif- ic things businesses need to consider depending on their circumstances. For example, someone starting a business from their home may not think about anything beyond the standard home insurance coverage. But if they keep product of any kind on site — whether it’s a shipment of cosmetics or computers that have been dropped off for repair — any damages to those items will not be covered under a home insurance policy.
Professionals might also consider errors and omissions coverage to protect themselves from customers claiming they have been harmed in some ways by their services. An importer/exporter would need to look carefully at its property insurance coverage, as well as liability in the event that someone becomes ill by a product you sold.
Proprietors who are vital to a business’ day-to-day operations may need a key person insurance policy to cover any eventualities where they are unable to run the business. When staff are handling cash transactions such as in a retail operations, employee theft and dishonesty coverage might be a good idea.
Mr. Karageorgos recommends reviewing your coverage annually or when circumstances change, and making sure you always have the appropriate type of coverage you need.
“Speak to others in your business to see what they do and who their insurer is. Find out what type of coverage they have. Check out professional associations to see if you can take advantage of insurance package discounts.” he said.
One shouldn’t discount the value of coverage for employees as well.
“People will change jobs for good benefits packages,” said Stephen Frank, vicepresident, policy development and health, for the Canadian Life and Health Insurance Association Inc. in Toronto.
Mr. Frank notes that almost all insurers have prebundled suites for employees, including sole proprietorships.
“You can simply buy what you want off a menu. All the work has been done for you. Ultimately, what you choose depends on your budget and risk tolerance.”