Business Insurance: Operating your business uninsured?

Business owners are driven and perhaps the most highly motivated group of people you will ever come across. They put their blood and sweat into the business they love, sometimes at the expense of the people they love. Sadly, in many cases, business owners fail to take the necessary steps to protect themselves personally from any liabilities that might arise from the operation of their business.

A commercial general liability coverage is a key product that many small business owners neglect to put in place. In theory, this is understandable. As with most insurance, it feels like an expense that one rarely uses. However, a good business insurance policy is one of the most valuable products a small business owner can have.

While there are several issues that can arise when operating a business without insurance, below I will outline 3 major concerns.

Loss of customers/contracts

One of the most common issues a small business owner can encounter when uninsured is loss of prospective clients. Take contractors, consultants or even retailers for example. Most clients will require that a contract is signed prior to the performance of any services or the delivery of any products. In almost every instance, these contracts will have an insurance requirement. Ignoring those requirements could result in losing the business entirely, as well as earning a negative reputation in your industry.

In some cases, small business owners may opt to wait until the last minute to purchase required business insurance coverage as a means to save money. This strategy is ill-advised. In many cases, the process of putting a commercial insurance policy in place can take several days, even weeks to complete. Utilizing this strategy will probably result in losing the customer as well. We routinely advise our clients to have at a minimum, a basic business insurance policy in place before soliciting clients and then adjusting existing coverage to meet the new requirements.

Personal Liability and Bankruptcy

We run into business owners every day who operate as sole-proprietors. The sole-proprietorship as a business structure is the quickest and most cost effective way to get up and running as a business owner. The downside in a sole-proprietorship is that liability from business activity flows directly through to the business owner potentially compromising the business owner’s personal assets.

Ultimately, even if a business structure like incorporation for example, provides better protection for a business owner, it still does not prevent a client or customer from suing the small business owner personally. A commercial general liability business policy not only protects the business entity, it also protects the business owner and their employees.

If you are operating your business without business insurance and you are personally named in a lawsuit, your personal assets are most definitely at risk.

Legal/Industry Non-Compliance

There are a slew of provincial and federal laws that require businesses of all types to have insurance for a variety of exposures. As insurance advisors running an agency, the financial services commission of Ontario requires that we secure both errors and omissions insurance but also commercial general liability coverage. Your industry may also have certain provincial or federally mandated insurance requirements. Failure to comply with these requirements may result in penalties that can include expensive fines, revocation of licenses required to operate the business, as well as being forced to cease all operations of the business. In some cases, jail time might even be a consequence of not being properly insured. Make sure you have addressed all insurance requirements for the business you are operating. In many cases, the cost of your yearly premium is a fractional expense when compared to the cost of fines and damage to the reputation of your business within and outside your industry.

If you are looking to get the right coverage in place for your small business, we can help. Our business insurance packages are designed to cover you for most risks associated with a variety of industry exposures. Let’s chat.