For established and aspiring entrepreneurs in the online business world, competition is fierce. However, by differentiating yourself from your competitors, you can build a growing client list and run a profitable small business.
One way to do that is to get a comprehensive business insurance policy to protect your finances and your customers if something unexpectedly goes wrong.
Let's review business insurance for an e-commerce business in Canada, why you need it, what your policy should include as well as how much it costs.
How does business insurance work?
Similar to insurance that protects your home or automobile, a business insurance policy protects your business’s assets and financial wellness.
Moreover, the premiums you pay for buildings, machinery and equipment used in your business are tax deductible.
This makes business insurance a practical investment.
Insurance helps business owners cover expensive and unforeseen losses, damages or legal threats that could upend their finances and drive them into bankruptcy. After all, there is no such thing as a risk-free business.
For example, a:
- Fire or extreme weather could damage your workplace, destroying equipment and inventory.
- Product you sell to a customer could cause them physical or financial harm.
- Cyber-attack could cripple your operations, exposing confidential customer information and leading to legal action against you by affected customers.
If one of these scenarios happens to you, the cost to deal with the problem could run into tens of thousands of dollars.
With business insurance, you will recover more quickly than without it.
Without it, you're on your own to pay for damages or the outcome of lawsuits. Even if a lawsuit against you is dismissed or your legal defence is successful, you will likely pay expensive legal fees.
Ultimately, business insurance minimizes financial losses from unexpected events beyond your control and meets the contractual obligations you may have.
It also gives you peace of mind knowing if something does go awry, you've got coverage. Insurance is the backbone of your risk management plan.
Related: Is your small business at risk from a cyber-attack?
Is business insurance mandatory in Canada?
Business insurance is a legal or regulatory requirement for some professions or industries, such as:
- Accountants
- Health and wellness practitioners
- Engineers
However, business insurance is not required for Canadian businesses in other sectors.
Regardless, opting to go without protection for your business venture is a risky roll of the dice that could result in financial and reputational disaster.
In the annual Zensurance.com survey of Canadian business owners, we asked respondents who don't have coverage how they would pay for an expensive loss without insurance. It's alarming to know that a significant number of them:
- a) Don't know what they would do
- b) Haven't thought about it
- c) Say they would declare bankruptcy
Others said they believed their homeowner insurance would cover them.
Spoiler alert: Don't assume your homeowner insurance will cover your business.
Homeowner insurance policies aren't designed to cover business-related activities and liabilities.
That leads to my next point: Do home-based companies need business insurance? Yes, they certainly do.
What is home-based business insurance?
There are many upsides for small business owners, startups, side hustlers and independent professionals running their enterprises out of their homes.
Alas, there are also challenges.
A homeowner or condo insurance policy doesn’t cover many risks faced by home-based businesses, including third-party liability -- likely your biggest risk. That’s why it’s critical to have a home-based business insurance policy.
What you get from a home-based business policy
This type of policy covers the liability and financial risks your home-based business faces online and offline, such as:
- Third-party bodily injuries and third-party property damages caused by the products you sell or the services you provide
- Damages caused by hacking of your website, email or point-of-sale (POS) system
It isn't simply buying business insurance. It's more about getting the right type of insurance to address your business's specific risks.
A licensed insurance broker can serve as an advisor, guiding you to the coverage that is right for your venture or profession.
Related: How to defend yourself against business email compromise
What insurance do you need for an online store?
Online business insurance in Canada is vital for every business owner, start up or online seller (even if your online shop is a side hustle or part-time venture).
Cyber-attacks and data breaches are the most obvious of the risks online businesses face.
A survey by the Canadian Independent Federation of Business found that nearly half of Canadian small businesses (45%) experienced a cyber-attack in 2022.
A separate survey of small businesses conducted in 2023 by the Insurance Bureau of Canada found that 69% don't consider cybersecurity a financial priority.
Any business or independent professional who has an online presence and uses e-commerce should have cyber liability insurance.
A single data loss event can cause a small business to close. Being aware and prepared for these risks is key to running a successful online business.
As mentioned, e-commerce businesses also face the risk of product liability from the items they sell. They also risk having to pay for damage to business equipment and merchandise if stolen or damaged by fire, water or a natural disaster.
Here are the most common coverages e-commerce businesses need:
- Cyber liability insurance, which covers your costs for legal advice, notification and credit-monitoring expenses, restoration of software systems, and losses you sustain from a system outage following a cyber-attack or data breach.
- Product liability insurance. This insures you against customer injuries or damage to their property caused by the goods you sell, whether you manufacture the items or not.
- General liability insurance. General liability covers third-party bodily injuries and third-party property damage to customers or visitors that occur on your premises or are caused by your operations. It also protects you from allegations of defamation and copyright infringement related to your advertising.
- Commercial property insurance insures your place of business, even if your place of business is your home. This includes your contents (e.g. electronics, office furniture), and merchandise lost due to fire, water, a natural disaster, theft or vandalism.
How much is insurance for a small business in Canada?
Insurance companies determine the price of a policy (also called a premium) based on details about your operations. An insurance broker can help you get an affordable policy by shopping the market for you, but an insurance company sets the annual cost of that policy.
They base their prices on several factors, including:
- Your business location
- The type of business and the products or services you offer
- The value of your business property, equipment and inventory
- Your years of experience
- Your annual and projected gross revenue
- The amount of insurance coverage you require
- How many employees you have (if applicable)
- Your insurance claims history
An insurance broker can help you get the right type of affordable coverage for your business, customize it to suit your needs, help if you must file a claim and answer any questions you have about your policy.
Where can I buy online business insurance?
Zensurance.com makes buying business insurance for your e-commerce venture or small business affordable, convenient, quick and easy.
We’ve helped over 300,000 Canadian online small businesses and independent professionals find low-cost insurance. Our clients rate us 4.8 out of 5 stars on Google Reviews and 4.9 out of 5 stars on Trustpilot.
Our online application takes less than five minutes to complete for a free quote. You have the option to buy your policy instantly online and receive your policy documents and a certificate of insurance the same day.
If you prefer to speak to one of our brokers, they’re happy to help. All of Zensurance.com’s brokers are licensed by the Registered Insurance Brokers of Ontario or their appropriate regulatory bodies in other Canadian provinces.
Frequently Asked Questions
Still have questions? The answers might be here.
What type of insurance do I need for an e-commerce business in Canada?
The most common coverages e-commerce businesses need include:
- Cyber liability insurance covers your costs for legal advice, notification and credit-monitoring expenses, restoration of software systems, and losses you sustain from a systems outage following a cyber-attack or data breach.
- Product liability insurance covers customer injuries or damage to their property caused by the goods you sell, whether you manufacture the items or not.
- General liability insurance covers third-party bodily injuries and third-party property damage to customers or visitors that occur on your premises or are caused by your operations. It also includes protection against allegations of defamation and copyright infringement related to your advertising.
- Commercial property insurance covers your place of business (even if that’s your home), your contents (e.g. electronics, office furniture), and merchandise from damages and losses due to fire, water, a natural disaster, theft and vandalism.
How much does online business insurance cost?
Insurance companies determine the price of a policy (also called a premium) based on details about your operations, including:
- Your location
- The type of business and the products or services you offer
- The value of your business property, contents and inventory
- Your years of experience
- Your annual and projected gross revenue
- The amount of insurance coverage you require
- How many employees you have (if applicable)
- Your insurance claims history
What types of insurance should a Canadian e-commerce business consider?
The most common coverages e-commerce businesses need include:
- Cyber liability insurance covers costs for legal advice, notification and credit monitoring expenses, restoration of software systems, and losses resulting from a systems outage following a cyber-attack or data breach.
- Product liability insurance is crucial for e-commerce businesses. It provides financial relief for customer injuries or property damage caused by the goods you sell, regardless of whether you manufacture them.
- General liability insurance is essential for e-commerce businesses as it covers third-party bodily injuries and third-party property damages to customers or visitors that occur on your premises or are caused by your operations. It also offers protection against allegations of defamation and copyright infringement related to your advertising, which could potentially harm your business's reputation.
- Commercial property insurance protects your place of business, contents and merchandise from unexpected events such as fire, water damage, natural disasters, theft and vandalism.
What types of online business insurance are available in Canada?
Most online businesses in Canada require the following types of insurance:
- Cyber liability insurance shields your business from the high costs of legal advice, customer notification and credit monitoring fees after a data breach. This coverage also helps restore your software systems and recoup losses from system outages caused by cyber-attacks.
- Product liability insurance protects your business from customer claims of injury or property damage caused by the products you sell, whether you manufacture them or not. It ensures that your customers are safe, and your business remains secure from unexpected claims.
- General liability insurance covers the costs of third-party bodily injuries and property damage that might happen on your premises or because of your business activities. Additionally, it offers protection against allegations of defamation and copyright infringement linked to your advertising efforts.
- Commercial property insurance safeguards your business space, whether it’s a traditional office or a home-based setup. This policy covers damages and losses to your electronics, office furniture, and merchandise due to fire, water damage, natural disasters, theft and vandalism.
What types of coverage should be included in a Canadian online business insurance policy?
The most common coverages Canadian online businesses need include:
- Cyber liability insurance to stay ahead of cyber threats with coverage that includes legal fees, customer notification and credit-monitoring expenses, and software system restoration. If a cyber-attack or data breach disrupts your operations, this insurance helps you recover swiftly.
- Product liability insurance safeguards your business from claims of injury or property damage caused by the products you sell. Whether you manufacture the items or not, this insurance protects you against potential legal battles and compensation costs.
- General liability insurance protects your business from the financial fallout of third-party injuries and property damage on your premises or due to your operations. This coverage also includes protection against defamation and copyright infringement claims related to your advertising.
- Commercial property insurance keeps your business premises -- whether a storefront or home-based office -- and its contents safe from damage and losses due to fire, water damage, natural disasters, theft and vandalism. It covers your electronics, office furniture, and merchandise, ensuring your business can bounce back from any physical setbacks.
The information contained in this blog post is provided for informational purposes only and should not be construed as an endorsement or advice from GoDaddy on any subject matter.
