When a winter melt in 2010 flooded entrepreneur Dawn Mucci’s basement – where she was running her franchise operation – it was her business insurance that helped her bounce back quickly.
“Everything was taken care of. I was pleasantly surprised. The only thing that wasn’t taken care of was my stress,” says Ms. Mucci, founder and chief executive officer of Lice Squad, which offers eco-friendly products and services across Canada to cope with lice.
About 45 centimetres of water filled the bottom of her Innisfil, Ont., home, damaging everything from electronics to her company’s products and forcing her to move the operation to her dining room one floor up.
“It was very upsetting,” Ms. Mucci recalls. "But you have to keep your operation going. You’re not just supporting yourself, you’re supporting your franchises. Having a reliable and good insurance provider was critical. You have to think of these things when you’re a business owner.”
Some home-based entrepreneurs forget to add business coverage to their personal policies, including property and contents insurance, says Pete Karageorgos, director of consumer and industry relations at the Insurance Bureau of Canada.
It’s an additional premium, he says, but it can save entrepreneurs a lot more if they are hit by a fire, flood or other incidents.
Mr. Karageorgos uses the example of an entrepreneur with a home-based computer-repair business whose customers’ equipment was damaged in a flood on his property. The business owner didn’t have business coverage on his home policy, so the losses weren’t covered. “That was an expensive lesson,” Mr. Karageorgos says.
The same lesson applies to business owners who use their personal vehicles for work. If they have customer products in the car, and the vehicle is stolen, for example, those contents aren’t covered without business coverage on the car.
Entrepreneurs should also consider other insurance products, experts say, whether they work at home or in a commercial or industrial space, such as business interruption insurance, which covers the loss of earnings if the operation has to shut down due to a flood or fire, for example.
Insurance is not something you can set and forget.— Dan Kelly, president of the Canadian Federation of Independent Business
Many businesses also buy liability insurance to cover on-site injuries to clients or staff, as well as product liability that protects them if their product is found to be defective or causes harm to a user. Professional liability, which protects business owners who are sued for errors, omissions or negligence in their work, is also becoming more common, as is cyber liability, which covers a company for an electronic security breach.
Some startups wait to buy business insurance until after their company has gained momentum, which could be too late.
Dan Kelly, president of the Canadian Federation of Independent Business (CFIB), advises entrepreneurs to buy insurance early on and recommends they revisit their policies regularly, such as every three years. “Insurance is not something you can set and forget,” Mr. Kelly says.
To ensure owners have the right amount of coverage for their particular company – not too much or too little – Mr. Kelly suggests using an insurance broker. “You need someone in your corner who can share with you the risks you may be taking on and ensure you have proper protection,” he says.
Business owners who belong to certain associations might have access to group coverage plans that can reduce their premiums and deductibles. For example, CFIB members can sign up for an insurance package from Northbridge Insurance that also provides certain types of free legal advice for a year.
Toronto-based Foxquilt Inc. is a financial technology company that offers small-businesses group purchasing power for insurance. The company caters to the many small businesses and consumers who can’t access group insurance.
Foxquilt co-founder and chief financial officer Karim Jamal says many entrepreneurs don’t realize how quickly a flood, fire or liability case could derail their company’s growth if they don’t have proper coverage. “Small businesses are so mired in growing and making revenue that [they] tend to overlook some of the things that could disrupt the business,” Mr. Jamal says. “It’s a cliché, but having insurance is about having peace mind.”
While the flood of 2010 was devastating for Ms. Mucci, having the right insurance helped her to recover and, not too long after, she expanded into a commercial office space. Her company has been growing ever since.
“Nobody likes insurance,” says Ms. Mucci, but for business owners, "you’d be insane not to get it.”