In general terms, commercial insurance will cover property, liability and workers’ compensation issues. Property insurance generally covers damages to your business property; liability insurance covers damages to third parties, and workers’ compensation insurance covers on-the-job injuries to employees.
There are other reasons, however, for taking out commercial insurance:
Regulatory obligations: There are some instances where regulatory requirements dictate what kind of commercial insurance you need. You are responsible for ensuring that your products and services are safe and your employees work in a healthy, safe environment.
Most employees, employers and workplaces in Ontario are covered by occupational health and safety regulations. As an employer in Ontario, your obligations include a duty to instruct, inform and supervise your workers in order to protect their health and safety.
Many Ontario contractors must have certain types of commercial insurance before they are even allowed to open for business. In this case, commercial insurance protects both the customer and the employer.
Contractual obligations: In many cases, businesses will not sign a contract with your company unless there are guarantees or assurances that payment will still occur if your business cannot fulfill its obligations. Some companies will purchase what are called “surety bonds” — a type of insurance that protects your customers or suppliers against losses if you don’t meet obligations.
Equipment type: While most commercial insurance will cover buildings and contents, it may not always cover you for equipment breakdown. Equipment breakdown insurance, a subset of commercial insurance, can typically help protect your equipment from damage caused by external sources such as fire, some forms of water damage and losses related to weather.
Similarly, if you operate a transport business, you are legally required to have commercial auto insurance (or for your personal vehicle if it is used in the business).