How much insurance do I need?
There are different kinds of insurance depending on the business need:
- Life events: Life insurance, health insurance, disability insurance and group benefits cover situations that may happen to you or people within your organization. Life events also include business succession planning and retirement planning (RRSPs, pension plans, etc).
- Property and casualty: This insurance covers the risk of loss to your business property, vehicles, inventory and any casualty occurring to a third party within your premises or due to your business activity.
- Workers’ Compensation: Most companies with employees are required to carry workers' compensation insurance for on-the-job injuries or illness. In Ontario, WSIB (Workplace Safety and Insurance Board) offers a special service for small companies (less than 20 workers).
- Directors’ liability insurance: This insurance deals with liability issues related to running the business and the representation of the business to others.
- An advisor who has experience with businesses and understands your needs can answer most of your questions or refer you to other experts as necessary.
How do I buy insurance?
Because insurance is critical for a small business, you want to be sure you're buying the right insurance for your company.
The most common method of buying insurance is through an advisor or broker. Advisors can analyze your business, help you determine what you really need, research coverage options, offer cost control advice, assist in the claims process and direct you to other professionals if you need help outside their area of expertise. In short, the advisor is a key player in your financial picture.
With whom should I speak first?
Most business issues need the expertise of more than one profession: for example, setting up the shareholders’ agreement or purchasing insurance to cover a business loan. If your accountant has been handling your business affairs, that professional will likely be able to give valuable advice to you. It’s also important to consult with an advisor with experience in business issues and life insurance. An advisor often won’t charge for consultations and can work with your accountant and lawyer when the need arises.
How do you make sure you've chosen the right advisor?
Other entrepreneurs are a good resource, as are trade groups, your local Chamber of Commerce and other professional organizations. Look for an advisor who knows business and will take the time to understand your business.
While advisors will sometimes handle only commercial insurance or only life and health insurance, try to deal with an advisor experienced in the segment of insurance you need. You should select advisors who work with strong, established insurance companies that have good claims records.
Once you've selected an advisor, be willing to invest the necessary time to work with that professional to understand your options in detail and determine the proper coverage for your needs.
And don't let the relationship end there. Keep your advisor informed about any claims you file or developments in your business that may require a change in coverage.
Do I need a group plan for my small business?
Group plans are typically available for groups starting with three individuals (not from the same household). The business is required to contribute a certain percentage towards the plan. With small groups, the structure of the plan tends to be limited to very few options; however, a small business may consider:
- An association group plan: The local Board of Trade, Chamber of Commerce or any other professional or trade association may offer group plans. If they fit your business needs, they could be a good alternative. The insurance cost in this case is spread over a much larger group. These plans, however, will not offer you much flexibility in designing your coverage.
- Individual policies: Ask your advisor to design your own plan that covers each employee with a policy. However, in order to avoid unintended income tax consequences for both the company and the employees, it may be necessary to formalize the arrangement through a Health and Welfare Trust or a formal group plan document. Also, group plans are available for smaller employers, and an advisor can arrange these plans.
- Business insurance is a key ingredient of your business plan. Talk to an advisor and examine your insurance options carefully before you put your signature on any contracts.