Launching your dream small business takes a lot of time, creativity, and–in many cases–a significant financial investment. Every penny counts when you’re bootstrapping your way to small business success, and insurance for “what-if” scenarios can feel like a low priority when you’re looking for ways to cut costs. But is small business insurance really that expensive? How much should you expect to pay for small business insurance in Canada? Small business insurance may be more affordable than you think if you choose the right products for your unique business needs. Here’s everything you need to know about the cost of small business insurance.\r\nWho needs small business insurance? \r\nMany savvy entrepreneurs follow Benjamin Franklin’s sage advice, “if you fail to plan, you are planning to fail” by trying to prepare for both the best and worst-case outcomes for their business. You never know when an unforeseen event could negatively impact your business’s finances–from a storm damaging your storefront to a client injured on your premises. \r\n\r\nCompanies operating in Canada are not legally required to obtain small business insurance. However, many entrepreneurs recognize they may not be able to cover unexpected repair fees, legal claims, or other unfortunate financial hurdles. To protect their business from potential financial loss many opt to purchase small business insurance.\r\nWhen to buy small business insurance \r\nAs soon as your business is ready to launch, start considering what type of small business insurance might be right for your organization. Small business insurance can help protect what you’ve worked so hard to build. \r\n\r\nYou should also revisit your existing insurance policy whenever your business undergoes a significant change. This might include relocating your business, buying new equipment, starting to offer new products, or hiring new employees. \r\nSmall business insurance benefits \r\nInsurance can help prevent potentially devastating financial situations for your business. There are various ways small business insurance can help protect you and your company. Small business insurance can help cover the cost of unexpected losses and expenses, such as:\r\n\r\n \tReplacing damaged company property\r\n \tLegal costs related to a lawsuit\r\n \tRepairs due to accidents such as water or fire damage\r\n \tMedical bills \r\n \tOther costs related to a negative unforeseen event or issue.\r\n\r\nThese are just some of the potential expenses which could put a strain on your business’ finances and put your long-term goals as an entrepreneur at risk.\r\nWhat kind of coverage do you need? \r\nSmall business insurance is an umbrella term that describes various types of insurance policies to protect business owners and their operations from risk. Finding the right insurance products for your company will depend on a variety of factors, including your industry, company size, and annual revenue. Here are the types of insurance small businesses typically choose to purchase: \r\n\r\nLiability insurance: Provides coverage for liability claims against your business related to bodily injury caused to another person or damage to another’s property. The two primary types of liability insurance are commercial general liability insurance and errors & omissions (E&O) insurance.\r\n\r\nCommercial property insurance: Protects the physical assets of your business from loss or damages such as fire and theft.\r\n\r\nCommercial auto insurance: Provides coverage for third-party liability or property damage that may occur when using a vehicle for business purposes\r\n\r\nCybersecurity insurance: Provides coverage for costs related to responding to and recovering from a cyber attack, including legal claims that could result from data breaches\r\n\r\nBusiness interruption insurance: Helps protect your business if you’re forced to temporarily suspend operations due to a disaster, such as a power outage\r\nHow much does small business insurance cost? \r\nThe cost of small business insurance varies widely and depends on your company’s insurance needs. Keep in mind that you may be able to negotiate savings by bundling several insurance products into a single policy for your business. \r\n\r\nMany experts will advise you to opt for the maximum coverage your business can afford. Broader coverage will enhance your financial buffer if you ever do find yourself in the unfortunate position of needing to file a claim. \r\nUnderstanding small business insurance premiums and deductibles\r\nYour insurance premium is the amount you pay per month (or other agreed upon term with your insurance provider) for your small business insurance policy. Most small business insurance products also include a deductible, which is the amount you’re required to pay out of pocket when filing a claim before your insurance provider covers its share of the costs. \r\n\r\nFor example, if your storefront suffers $5,000 of property damage due to vandalism and the deductible on your commercial property insurance is $500, then your insurance provider would reimburse you for a maximum of $4,500.\r\n\r\nDepending on your policy, your deductible could be a specific dollar amount or a percentage of the total amount covered in your policy. A higher deductible generally means a lower premium. \r\n\r\nKeep in mind that if you choose an insurance plan with a higher deductible in order to secure a lower premium, be prepared to pay that amount in the event that you need to file a claim. \r\nWhat factors affect the cost of small business insurance \r\nThere are a number of factors that influence how much your small business insurance will cost, in addition to your deductible. These risk factors help determine whether your business is perceived as high-risk or low-risk by insurers Your premiums will reflect that level of risk. Getting quotes from several insurance providers is the best way to learn where your business sits on that risk spectrum and what you can expect to pay. The following factors will be taken under consideration:\r\nType of business\r\nThe cost of small business insurance for your company depends on the nature of your business activities. The higher the risk of claims against your business, the higher your insurance premiums typically will be. For example, businesses operating in industries, like construction, that involve high-risk activities will likely pay more for insurance than businesses in an industry, such as web design, where the risk of claims is much lower. \r\nAnnual income\r\nBusinesses with large annual revenues can also expect to pay more for insurance than those with more modest earnings. That’s because higher revenue typically means your business performs a higher number of activities, which means more interactions with customers, employees, and contractors. To insurers, this increases the chance of an unexpected event that would lead to your business filing an insurance claim. \r\nNumber of employees\r\nJust as annual business revenues can impact insurance premiums so, too, can your number of employees. The more employees in a business, the more likely an unforeseen event may negatively impact one of them. As a result, your business may be evaluated as higher-risk by insurers.\r\nClaim history\r\nIf you have a history of past insurance claims, it can affect the rates offered to your current small business. You can expect to pay higher premiums because insurers may perceive you as higher risk. On the flip side, a business with no prior claims history will likely be evaluated as lower-risk and be able to secure better rates. \r\nBusiness location\r\nInsurers consider the location of your small business to assess the cost of insurance. For example, the risk of property damage is greater if your business is located in a region where extreme weather conditions, such as floods, wildfires, tornadoes, or snowstorms frequently occur. Adjacent businesses and structures can also play a role. For example, if your retail business is next to a welding operation, your business may be perceived as a higher risk because of the increased threat of fire exposure. Insuring your small business in higher-risk areas is likely to cost more in premiums\r\n\r\nYour small business insurance needs depend on many variables. These variables can also determine the cost of your premiums. A good insurance provider can explain what you can expect to pay, as well as recommend a policy that best protects your company from unexpected expenses.