Do you own a sole proprietorship business? Congratulations — that’s a tough (but highly rewarding) gig. You’re responsible for wearing all the hats and dealing with the numerous risks associated with operating. But you’re in luck as our team at LiabilityCover can shoulder some of that responsibility! We make insurance simple by assigning a broker with years of experience covering businesses like yours.
Throughout the next sections, we’ll dive deeper into the world of sole proprietorship insurance and answer some need-to-know questions.
Business Liability Insurance Coverage for Sole Proprietorship
As a solo businessperson, you handle everything yourself. You enjoy the perks that come with working on your own terms but also face many risks, so it’s vital to ensure you’re protected with the right insurance coverage.
It’s a common misconception that home insurance covers business activities. In reality, normal home policies exclude any work-related claims or have a limit far too low for adequate coverage.
Since you are responsible for all your business’ risks, it’s crucial to protect yourself with a comprehensive sole proprietorship insurance package.
Here at LiabilityCover, we’ve made it easy to acquire the coverage you need. Our excellent relationships with the country’s leading insurers let us connect you seamlessly to a broker or agent with experience covering solo proprietorship businesses like yours.
What Is Sole Proprietorship Insurance Coverage?
Solo proprietorship insurance is a policy package that protects solopreneurs from the risks associated with running an unincorporated business. The main coverage areas are negligence and third-party bodily injury or property damage claims.
The policy bundles can be altered depending on your industry and unique risks, making them cost-effective options for all you busy businesspeople.
Real-World Sole Proprietorship Insurance Claims Scenarios
The range of scenarios protected by solo proprietorship insurance is vast. But to get a brief idea of the situations where insurance can save your business from permanent closure, consider the real-world examples here:
Example One: Property Damage Claim
You are installing a skylight in your client’s bathroom. While working on the roof, you accidentally drop a heavy item that breaks the bathtub beyond repair.
As expected, your client sues you for property damage. Thankfully, you took out a commercial general liability insurance policy that covers the cost of replacing the $5,000 tub.
Example Two: Faulty Design Claim
You made an exquisite chest of drawers that you sold to a customer seven days ago. Unfortunately, they call you to explain the item has collapsed due to loose joint connections and has broken their valuables inside it.
Your customer successfully sues you for third-party property damage due to a design of fault.
Luckily, your product liability insurance covers the legal fees associated with the case and the cost of replacing their valuable,s equalling $10,000.
Example Three: Theft Claim
You are a potter creating bespoke ceramic items for your clients in your spare time.
Sadly, somebody broke into your home studio overnight and stole your expensive pottery wheel and a few sold pieces.
Thankfully, your commercial property insurance covers the cost of replacing the wheel and the stolen pieces, equalling $7,500.
What Does Sole Proprietorship Insurance Cover?
Certain businesses come with different risks. For instance, a freelance graphic designer will not need the same coverage types as an independent plumber. But you don’t need to worry about figuring out which policies are right for your business — our team at LiabilityCover does that for you!
We recommend policies that cover the risks you’re most likely to face. As those risks vary by the product or service you provide (among other factors), we’ve listed the core coverages that most business owners need below:
Commercial General Liability Insurance Coverage
Sometimes called slip-and-fall insurance, commercial general liability insurance protects against third-party allegations of bodily injuries and property damage.
We’ve heard many home-based business owners say their home insurance covers these scenarios; however, that’s not the case. In reality, home policies exclude anything work-related from their coverages. Therefore, you need a steadfast CGL policy.
The specific coverage areas are as follows:
- Bodily injury — Third-party bodily harm due to your business operations.
- Product liability — Property damage or bodily injury caused by an item you manufacture, distribute, or sell.
- Tenant’s legal liability — Pays for repairing or replacing others’ property that you occupy or rent for commercial reasons.
- Personal and advertising injury liability — It covers allegations of slander, false advertising, libel, and defamation.
Professional Liability Insurance Coverage
Otherwise known as errors and omissions (E and O) insurance, professional liability coverage protects you against claims alleging misconduct, negligence, or failure to deliver a service as advertised.
It’s essential coverage if your sole proprietorship offers services or advice for a fee, like freelance designers. Typically, it covers the legal fees and damages, regardless of the lawsuit’s outcome.
It won’t cover:
- Cost guarantees
- Price estimates
- Incorrect estimates of economic returns
- Criminal acts
- Dishonest acts
- Fraudulent acts
- Violation of securities acts
Most basic professional liability insurance policies start at $250 per year, which is a small price to pay for the depth of protection you receive. But of course, your premium can change depending on projected revenue, years of experience, your industry, and so much more.
Cyber Liability Insurance Coverage
Contrary to popular belief, hackers target small businesses more than larger enterprises as they believe (and often rightly so) that they won’t have many security levels to get through. Since the world is becoming increasingly virtual, it’s vital to have a cyber liability insurance policy to protect you.
The common coverage areas are:
- Incident response costs, including the fees associated with 24/7 access to cyber incident response hotlines and retaining a team to coordinate a response
- System restoration costs
- System business interruption losses
- Legal, breach, and forensic management costs, including notification fees, credit monitoring, and crisis management
You can also add a social engineering rider that covers you if an employee is manipulated into providing system access or sending funds to a fraudulent account.
Commercial Property Insurance Coverage
Commercial property insurance protects your business’s premise and contents, including technology, equipment, inventory, and stock, from external disasters. The policy has many names, including:
- Business property insurance
- Business contents insurance
- Commercial building insurance
- Commercial rental insurance
We recommend a commercial property insurance policy if:
- You lease or own a commercial building, inventory, and/or equipment.
- You have a commercial or office space.
- You use electronics like laptops, smartphones, and tablets for work reasons.
- You use machinery, hardware, or computers for business reasons.
- Your or your employees work off-site.
Just keep in mind that it won’t cover theft of cash, securities, or precious metals. You need to purchase crime insurance for that protection.
Product Liability Insurance Coverage
If you manufacture, sell, or distribute a product (including food and beverages), you need this policy. It protects against allegations of property damage or bodily injury caused by your product. The most common coverage areas are insufficient safety warnings and incorrect labelling. It’s useful for both online retailers and brick-and-mortar locations.
The amount of coverage you need depends on a variety of factors, such as:
- Your product type
- The volume of products you sell
- The associated risks
The broker we assign you can help figure out your optimal coverage limits. Just ensure you answer their questions about your products accurately.
Equipment Breakdown Insurance Coverage
Finally, equipment breakdown insurance covers the fees associated with replacing or repairing equipment broken due to a mechanical or electrical fault. It’s not the same as commercial property insurance, which covers damages sustained from an external disaster.
We recommend this policy to any business that uses expensive mechanical or electrical equipment, such as:
- Bakeries and restaurants with kitchen equipment like ovens and fridges
- Contractors and skilled tradespeople
The coverage’s cost depends on a plethora of factors, including:
- The type of equipment you use
- How often you use the equipment
- Who uses the equipment
- Your insurance claims history
- Where the equipment is used
How Much Does Sole Proprietorship Insurance Coverage Cost in Canada?
For a standard commercial general liability insurance policy with a $2 million limit, you should expect to spend at least $450 per year. However, so many factors influence your specific premium price that the cost may change dramatically.
Some factors that affect the cost include:
- Your insurance claims history — A track record of consistent insurance claims bumps up the price of your insurance. Insurers use your past to estimate the likelihood of you claiming in the future. To score lower rates, it’s best to keep your claims to a minimum.
- The people you employ — You can be held responsible for the mistakes made by your employees if somebody files a lawsuit. Ultimately, the risk of this scenario increases as you expand your workforce. Thus, your premium payments inflate.
- Your industry sector — Every business comes with risks. But, some industries are riskier than others. The higher your industry’s risk level, the more likely a claim is made, and therefore, you’ll pay more for insurance.
- Your services or products — Some services and products have higher risks than others. For example, if you sell corrosive substances, you’ll pay more for insurance than somebody who sells children’s toys.
- Your years of experience and training — As you train and gain experience, you aren’t as likely to make a mistake. So, you will benefit from more attractive insurance premiums the longer you stay working in your industry.
- Your business location — Some areas of Canada are more susceptible to crime and adverse weather. If you operate from one of the areas below, you may pay more for insurance than similar companies in safer locations:
- North Bay, Ontario
- Hamilton, Ontario
- Barrie, Ontario
- Sudbury, Ontario
- Windsor, Ontario
- Brampton, Ontario
- Sault Ste. Marie, Ontario
- Surrey, British Columbia
- Regina, Saskatchewan
- Winnipeg, Manitoba
- Red Deer, Alberta
- Lethbridge, Alberta
- St. John’s, Newfoundland and Labrador
- Saint John, New Brunswick
- Moncton, New Brunswick
- Québec City, Quebec
- Saguenay, Quebec
- Montréal, Quebec
- Trois-Rivières, Quebec
- Your annual and forecasted revenue — While a high turnover is fantastic for your business, it shows there’s more at stake during a third-party lawsuit. The claimant will typically request more damages if they know your revenue can take the hit. Therefore, insurers need to charge you more to compensate for the increased risk.
To ensure you get the best deal, fill in our short inquiry form. We’ve worked with Canada’s leading licensed insurance brokers and agents for years, enabling us to quickly connect you to the most attractive rates and coverage limits in the country.
Why Choose LiabilityCover?
Our main mission is to afford you the time, space, and information required to make effective business protection decisions. How do we do this? By offering a tailored service, that analyzes your sole proprietorship insurance needs and connects you with your perfect insurer.
Frequently Asked Questions
How Do You Get Sole Proprietorship Insurance in Canada?
With LiabilityCover, acquiring sole proprietorship insurance is uncomplicated. All you need to do is follow the four steps below:
- Fill out our short online inquiry form.
- We analyze your insurance requirements.
- Our team connects you to one of the country’s best insurance brokers or agents with experience covering sole proprietorship businesses like yours.
- Your designated broker or agent contacts you to guide you through the process.
Do You Actually Need Insurance As a Sole Proprietorship Company?
Yes, regardless of how small your business is, you should take out liability insurance. There are always risks that can threaten your survival should your client or customer pursue legal action. Thus, insurance is a vital part of your risk management strategy.
Will Sole Proprietorship Insurance Cover You If You Get Injured?
Sole proprietorship insurance will not cover you if you’re harmed. Coverage extends only to claims alleging third-party bodily injury or property damage. Injuries suffered by you or your employees aren’t protected.
Do You Need to Register Your Business to Obtain Liability Insurance Coverage?
Generally speaking, you need to register your business to acquire liability insurance coverage. However, some industries don’t require registration beforehand. We recommend speaking to your assigned broker to figure out whether you need to register your business prior to acquiring insurance.