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How Much is Liability Insurance for a Small Business in Canada?

Every business needs liability insurance as it will safeguard you against huge financial losses from claims and lawsuits. But for Canadian business owners, it is vital to understand the cost of liability insurance for budgeting and risk management.

These costs can vary wildly based on your circumstances so it can be hard to give an exact figure. Here, we’ll look at what those factors are, along with a ballpark figure on what you’ll be expected to pay.

Types of Liability Insurance

There are several types of liability coverage available for businesses. It’s important to understand what you need and what you don’t. Here are the main types available.

General Liability Insurance – This is the most popular type of insurance for businesses. I will cover you in the event of damage caused by the company, or a claim for any injury that happens at the site of your business.

Errors & Omissions – Costly mistakes can be made at a business that can affect others. Errors & Omissions insurance protects against these mistakes including negligence, errors, or omissions in the services they provide.

errors and omissions insurance

Commercial Auto – If you use vehicles for business purposes, then you’ll need Commercial Auto insurance. This will protect you in the event of any business-related accidents.

Directors & Officers – Upper management are most at risk from legal actions due to their decisions. Directors & Officers insurance will help to cover associated costs such as court fees, settlements, and loss of income.

Cybersecurity – The internet has opened up businesses to a wide range of new security risks. Cybersecurity Insurance will protect you from threats such as fraud, data breaches, and damage to intellectual property.

Product Liability – If you manufacture a product, there may be a defect that causes injury or damage. If so, Product Liability can protect you from any associated claims.

Factors Influencing the Cost of Liability Insurance

Now we know the types of liability insurance available, it’s important to know what factors influence the amount you’ll have to pay. This can give you an idea of what end of the cost scale your business will be at.

Type of Business – The nature of the business will play a huge role in how much insurance will cost. For example, a work-from-home tech firm will be seen as a much lower risk than a construction company.

Business Size – The bigger the business, the higher the likelihood of a claim. Insurance companies will see you as more of a risk, and therefore, the premiums will be higher.

Location – Insurance companies will look at the environmental factors and claim histories from the location you’re in. As a general rule, businesses in urban areas will usually have to pay higher premiums than those in rural areas.

Coverage Limits – The coverage limit is the maximum the insurance company will pay out in the event of a claim. The higher the coverage limit, the more expensive the insurance will be.

Deductibles – The deductible is the amount you pay before a claim gets processed. Lower deductibles will increase your premiums.

Claims History – If your business has made a lot of claims in the past, then you will likely face higher premiums.

Experience – The longer your business has been operating, the more trusted it will be. A long-term business with well-qualified owners will likely have lower premiums.

Average Costs of Liability Insurance

Now we get on to the all-important question of cost. All of the types of insurance that we have looked at above roughly have the same cost range. That is usually in the region of $500 to $3,000 but for some, it will be cheaper, and others more expensive.

You can get an idea of where your business will be in this range by looking at all the factors above. For most small to medium-sized businesses, they can expect to pay less than $1,500 annually for one type of liability insurance.

Small companies can often get the benefit of Small Business Insurance that can bundle different types of insurances into the same policy. This can help save costs and maximize your protection.

Reducing Liability Insurance Costs

There are a few ways that you can reduce your liability insurance costs. One of the best ways is to bundle policies together, which can result in lower overall premiums. You can also increase your deductible if you’re confident you can meet the upfront cost.

It also pays to shop around. Insurers all assess risks in different ways and, therefore, provide different premiums. It’s also a great idea to work with a broker who can look at your circumstances to find the right deal for you.

bundle insurance policies together

Final Thoughts

When it comes to liability insurance, the benefits of having a great policy can be vast. It’s an important part of risk management and can save your business from huge financial costs.

However, the only sure way of finding out what your premium will be is by getting a quote. If you’re looking for liability coverage, then contact Ron Johnson Insurance today and we’ll be happy to help find the perfect liability coverage for you.

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