Business insurance: Protect your business from the unexpected

Published Wednesday 5 November 2025

Table of contents

• What is business insurance
• Types of business insurance
• How to choose the right business insurance for your needs
• How much does business insurance cost
• Getting started with small business insurance
• How to buy business insurance
• Reviewing your business insurance coverage
• Managing business insurance as part of your financial planning
• FAQs on business insurance

Key takeaways

• Assess your business's unique risks by evaluating factors like physical location, customer interactions, employee count, and industry-specific hazards to determine which types of coverage you actually need rather than purchasing generic policies.

• Prioritize essential coverage types including general liability for customer injuries and property damage, workers' compensation if you have employees, and property insurance to protect your physical assets and equipment.

• Review your insurance coverage annually and whenever your business undergoes significant changes such as hiring employees, expanding locations, launching new products, or increasing revenue to ensure adequate protection.

• Obtain quotes from multiple providers and work with insurance brokers who can compare policies across different companies, focusing on coverage details, deductibles, and policy limits rather than just premium costs.

What is business insurance

Business insurance is a safety net for your company. It protects you from financial losses that can happen during normal business operations, like accidents, property damage, or lawsuits.

Business insurance helps you handle unexpected events, so a single incident doesn’t put your business at risk. Having the right coverage gives you the confidence to focus on growth, knowing you’re prepared.

Types of business insurance

Here are common types of business insurance for your small business to consider.

Property

Property insurance protects your business buildings and their contents from damage or loss. This covers:

• Theft and break-ins: Equipment, inventory, and cash
• Fire damage: Building structure and contents
• Natural disasters: Weather-related damage (coverage varies by policy)
• Vandalism: Malicious damage to your property

If you have significant assets in one location, property insurance helps protect your investment.

Vehicle

Vehicle insurance covers your business cars, trucks, and other commercial vehicles. Essential coverage includes:

• Accident damage: Repairs to your vehicles and others involved
• Theft protection: Full vehicle replacement if stolen
• Injury coverage: Medical costs for drivers and passengers
• Liability protection: Legal costs if you’re sued by other drivers

Public liability

Public liability insurance protects you when your business accidentally harms others or damages their property. It covers:

• Property damage: When you damage someone else’s belongings
• Personal injury: If a customer is hurt on your premises
• Product liability: Illness or injury from your products
• Legal costs: Court fees and punitive damages

Note: To cover your employees, you need workers’ compensation insurance.

Workers’ compensation

Workers’ compensation insurance is mandatory if you have employees. It provides:

• Medical coverage: Hospital bills and treatment costs
• Wage replacement: Partial income while recovering
• Death benefits: Financial support for families
• Legal protection: Covers you against employee lawsuits

You must maintain a safe workplace, as this insurance supports but does not replace your safety efforts.

Professional liability

Professional liability insurance protects you when your professional services cause financial harm to clients. It covers:

• Errors and omissions: Mistakes in your work
• Negligence claims: When you fail to meet professional standards
• Legal defence: Court costs and settlements

Common for:

• lawyers
• doctors
• engineers
• accountants
• consultants
• other professional service providers

Business continuation

Business interruption insurance (also called business continuation) helps when you can’t operate normally due to covered events. It provides:

• Lost income replacement: Covers revenue you would have earned
• Operating expenses: Rent, utilities, and payroll during closure
• Temporary relocation: Costs to operate from another location
• Recovery acceleration: Funds to get back to full capacity faster

Common triggers:

• fire
• flood
• equipment breakdown
• supply chain disruptions

How to choose the right business insurance for your needs

Choosing the right insurance starts with understanding your business’s unique risks. Not every business needs the same type of coverage. Consider these points to find what’s right for you:

1. Assess your risks: Do you have a physical location customers visit? Do you handle sensitive client data? Do you have employees? Each of these brings different risks.
2. Understand your industry: A construction company has different insurance needs than a freelance writer. Research common requirements for your field.
3. Think about your assets: Make a list of your essential business property, including equipment, inventory, and vehicles. You’ll want to make sure they’re covered.
4. Balance coverage and cost: Aim for the right balance between coverage and cost by comparing quotes and choosing coverage that fits your needs.

How much does business insurance cost

The cost of business insurance isn’t one-size-fits-all. It depends on several factors specific to your business. Insurers will typically look at:

• Your industry: Some industries are considered higher risk than others. For example, a roofer might pay more than a graphic designer.
• Business size and number of employees: The more employees you have, the higher your potential for claims like workers’ compensation.
• Location: Your province and even your neighbourhood can affect your rates, as rules and risk factors differ regionally. For example, in certain provinces and territories, insurers may use your credit score to help set premiums, while this is banned in others.
• Coverage amount: The more coverage you need, the higher your premium will be.
• Claims history: A business with a history of claims may face higher costs.

Get quotes from several providers to understand your potential costs.

Getting started with small business insurance

Getting the right coverage helps you protect your business and manage costs. The right balance means you’re covered without paying for unnecessary extras.

Start with research:

• Talk to similar businesses: Learn what coverage they carry
• Consult your accountant: Get advice on financial protection needs
• Assess your risks: Identify your biggest potential losses
• Then approach brokers: So you can make informed decisions

How to buy business insurance

Follow these steps to buy business insurance:

1. Gather your documents: Have your business registration details, revenue estimates, and a list of your assets and operations ready.
2. Shop around for quotes: You can work directly with an insurance company or use an insurance broker who can compare policies from multiple providers for you. When dealing with federally regulated insurers, it’s helpful to know they are required by law to have a process to handle consumer complaints and must belong to a neutral third-party dispute resolution organization.
3. Review your policy options: Check the details to understand what is covered, the deductible amounts, and the policy limits, not just the price.
4. Purchase your policy: Once you’ve chosen the best policy for your business, you can complete the purchase and get your proof of insurance documents.

Reviewing your business insurance coverage

Review your insurance annually and whenever your business changes significantly.

Review triggers:

• Business growth: More employees, locations, or revenue
• New products or services: Different liability exposures
• Structure changes: Sole proprietor to corporation
• Major purchases: New equipment or property
• Market changes: Industry risks or regulations

This helps you keep the right coverage as your business changes.

Managing business insurance as part of your financial planning

Your business insurance is more than just a safety net; it’s a key part of your overall financial strategy. Keeping your coverage up to date protects your cash flow from unexpected hits and shows lenders and investors that you’re a responsible business owner.

By tracking your insurance expenses and reviewing your policies alongside your financial reports, you can make smarter decisions for your business’s future. Xero accounting software gives you a clear view of your finances, so you can run your business with confidence.

You can try Xero accounting software for free to see how it can help you manage your business finances.

FAQs on business insurance

Getting the right insurance can feel complicated. Here are answers to a few common questions small business owners ask.

What's the best insurance for a small business?

There is no single best insurance, as it depends on your business. Many small businesses start with a policy that bundles general liability, commercial property, and business interruption insurance. You can add other coverage, such as professional liability or commercial vehicle insurance, based on your risks.

How much does business insurance cost in Canada?

Costs vary widely based on your industry, location, number of employees, and the amount of coverage you need. A small, low-risk business might pay a few hundred dollars a year, while a larger, higher-risk operation could pay several thousand. The best way to know for sure is to get a custom quote.

Do I need business insurance if I work from home?

Yes, it's a good idea. Your homeowner’s insurance usually does not cover business activities. For example, the Government of Canada notes that your policy may not cover damage from frozen pipes if you are away for more than four days during cold weather. If a client gets injured at your home, your business equipment is stolen, or you face a lawsuit for a professional error, business insurance is what protects you.

When should I review my business insurance coverage?

You should review your policy at least once a year. It's also important to check in with your provider whenever your business goes through a significant change, such as hiring your first employee, moving to a new location, or launching a new product or service.