Small Business Liability Insurance: How Does It Work?

Small Business 101 | What to know about how liability insurance works

Starting small? You are not alone. Small business is the cornerstone of the Canadian economy and that’s why small businesses matter so much across the country. This is likely why you landed on this page – which is all about small business liability insurance.

If you’re just starting a business, you’ve probably been told you need it. But why is that and what steps are involved in actually acquiring it? We’ve got the answers you need.

First off, small business liability insurance is very important. It’s designed to protect you and your business in case someone is hurt or if you damage the property of others while operating your business. Imagine, for a moment, if one of your employees engaged in activity that resulted in one of your clients losing a substantial sum of money. You’d want liability insurance to protect your business and allow it to continue operating.

Don’t think that kind of thing is likely to happen? Fair enough. But even the most dedicated, hard-working small business owner can find themselves too busy to notice everything going on with their business, including the activities of employees.

Get small business liability insurance | Questions to consider...

Now that we know why small business liability insurance is important to have, let’s take a look at the key questions you’ll need to consider as you prepare to work with an insurance company to secure your coverage.

The insurance broker you’re working with can be expected to ask some of the following questions.

How is your small business structured?

  • Is your business a partnership, corporation, joint venture, or something else?
  • Are you, the small business owner, a manufacturer, wholesaler, distributor, retailer, importer, or exporter?

What products and services do you sell?

  • What were your products’ total sales – in Canada, the United States, and anywhere else – in the past year and what do you project them to be in the coming year?
  • How would you describe the products and services you sell? (Be prepared to provide, and discuss, brochures, catalogues, instruction manuals, and other important documentation associated with your business’s offerings.)
  • What new products and services are you planning to introduce and what products or services have you stopped offering?

How are your products and services managed and delivered?

  • Does your business produce or handle products that are dangerous (e.g., explosive, flammable, or poisonous)?
  • How are your products or services managed – is this handled by your employees or a third party?
  • How are the products you sell packaged and distributed?
  • When it comes to distributing your products and services, is this handled by your own team or dealers (such as wholesalers or retailers)?

What safety procedures do you have in place?

  • What is your plan for a product recall, should one occur? (And as an extension of that question, has your small business ever experienced a product recall?)
  • Who handles the design of your products – is this managed by an in-house team or third party?
  • Who tests your products and what are the procedures they follow for doing so?
  • How would you describe the differentiating factors setting your products apart from those of your competitors?
  • What is your history of making insurance claims involving your business? (Be prepared to provide concise though comprehensive answers to this important question.)
  • Do you or any of your employees use a company vehicle to carry out company business?
  • What is your emergency plan for handling crises like a fire or on-site injury?

Small business liability insurance: be prepared and honest

This is just a selection of the questions you’ll need to answer to complete the small business liability insurance application process. Some of the questions listed above are representative of a range of questions designed to help an insurer learn about the nature of your small business and the risks associated with operating that business.

For the sake of your business and the people who help make it possible – including yourself – it’s important you’re prepared to answer these questions fully and honestly.

Across Canada, ALIGNED Insurance brokers can help you get the best value and options for small business liability insurance. Contact us now to learn more and get aligned with the solutions you need to move your small business forward with confidence.

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