The Cost of Business Insurance in Ontario
Business insurance can cover the property owned by a company (buildings, vehicles, inventory, tools, equipment, office supplies etc.), the cost of potential legal action against the business related to the work it does, and things like lost revenue if a fire, flood or technological glitch makes you unable to do business for a certain period of time. For this reason, the price of business insurance is highly variable, starting at about $500 a year and ranging upwards of tens of thousands a year for big companies or those undertaking risky activities.
There are various business insurance policies on the market, each with specific coverage options catering to unique business needs. Some smaller home-based businesses may only require liability coverage (protection from lawsuits) because the business doesn’t have its own space, vehicles etc. Larger, more established businesses, will probably require property insurance for their office, retail and/or warehouse space, auto insurance for their fleet, employers liability for their employees, and a variety of other niche coverages depending on the work they do.
Any entrepreneur understands that it is essential to have some form of business insurance. In some industries, specific coverages may be required by law. Beyond that, many business owners are unsure of what business insurance they need, what it specifically covers and how much it all costs. Below is a brief breakdown on price by type of business insurance.
Most Common Types of Business Insurance:
General Liability Insurance
- Protects your business from liabilities that arise if you or your employees cause property damage or bodily injury to a third party arising through the course of your operations.
- Will also typically include coverage for your legal liability as a tenant.
- This is the type of insurance often required by your customers or your landlord in order to protect them if something goes wrong.
- COST: $400+/year, depending on factors like annual business revenue, number of employees, location and type of business.
More on General Liability Insurance
Product Liability Insurance
- Protects the business from legal action related to a product developed and/or sold by the company.
- Relevant for manufacturing and consumer goods industries and also in the construction / contractor industry protecting liability from completed operations.
- COST: Starts as low as $800 year and varies depending on factors like the type of product, how many are sold a year, where your products are sold, and what the product is used for. For example, a company that sells surgical equipment would pay higher premiums than one that sells mousepads, because the product is more likely to lead to injuries/losses.
More on Product Liability Insurance
Professional Liability Insurance / Errors & Omissions Insurance
- Essential for any professional business including doctors, lawyers, architects, consultants & realtors to protect against legal action regarding professional work provided.
- Many professional liability insurance policies are a required level of business insurance coverage according to union regulations and provincial/federal law.
- COST: $500 – $2,500+/year, depending on number of clients/patients and the kind of advice being offered.
More on Professional Liability Insurance and E & O
Property Insurance
- In exactly the same way that you might insure your home and personal contents against fire, water damage and other types of losses – any business that owns property will also require this coverage.
- Property can be physical buildings that you own, or it could also be business contents, tenants improvements, tools, equipment, stock and inventory or electronic equipment.
- Cost: $1,500+/year if you are insuring a building you own, depending on its size, location, age and what it’s being used for. If you are just insuring a smaller amount of property, e.g. tools, then this can be available for a fraction of that price.
More on business property insurance
Commercial Auto Insurance
- If you are using a car or truck to transport equipment, tools or goods to different locations, then you probably need Commercial Auto insurance.
- Typically, if your business owns less than 5 vehicles, each one is insured separately in a similar way to your personal auto. If you own more vehicles, then they can be insured as a fleet and benefit from collective pricing.
- Cost: $500+/year, depending on the company’s revenue, number of employees, number of client records and the level of cyber security in place to protect against hacks, data breaches etc.
More on commercial auto insurance
Cyber Insurance
- Essential if your business relies on technology in order to operate daily, e.g. managing daily interactions with your customers, keeping electronic client records, conducting e-commerce transactions or relying on the web or social media for marketing/lead generation.
- Cyber insurance is critical for technology businesses, but is increasingly seen as a must-have coverage for any business that relies on technology for marketing, payment processing and/or payroll.
- Cost: $1,500+/year, depending on the type of vehicle, your driving record, where your vehicle is being driven, and the specific use of the vehicle.
Workers Compensation Insurance (Legally Required in Ontario)
- It’s mandatory in Ontario that all independent operators, sole proprietors, partners, and executive officers of construction businesses carry WSIB insurance coverage for their employees.
- COST: = Insurable earnings x premium rate ÷ 100. As per the WSIB,
To calculate your premium, multiply your gross insurable earnings by your premium rate and divide by 100. If you have more than one NAICS code (NC), you will need to calculate each NC separately.
To calculate your premium, multiply your gross insurable earnings by your premium rate and divide by 100. If you have more than one NAICS code (NC), you will need to calculate each NC separately.
Industry Specific Policies
Aside from the common types of business insurance listed above, there are many industry specific insurance policies, that are tailored to the most common risks for that industry. Regardless, some level of protection is needed no matter what kind of company you own.
There’s no real average cost for business insurance, but there are average rates within each industry. Premiums are based on the amount of coverage received, the inherent risk associated with the business, and number of employees within the company. Once all factors are taken into consideration, a premium is calculated and charged on a yearly basis.
Overall, a small business could pay as little as $500/year for business insurance while a large company with many employees, products, materials, vehicles and other assets to insure could pay thousands of dollars in business insurance each year.
Protect Your Business
As a business owner you should take all aspects of your organization into consideration and understand what you need to insure, and what policies are best for your industry.
Contact one of our Mitchell & Whale business insurance advisors today to discuss the many business insurance options and policies available. Based on the details of your business, they’ll tailor a package of coverage just for your business, and give you a no obligation quote!
