Skip to main content
Ratehub logo
Ratehub logo

Is it illegal to not have business insurance?

Business insurance may not be required by law, but you should still consider purchasing a policy to protect your operations in the long run. In under five minutes, you can receive a customized insurance quote with us today.

start my quote
APOLLO Insurance

Business insurance is usually not required by law. One exception is commercial auto insurance if your business has a car or truck. Like any other vehicle, provincial laws mandate you buy the proper car insurance.

Other standard business insurance policies like liability insurance or contents coverage are typically not required by law. People and companies vital to your business, like clients and landlords, however, might require you to purchase a policy.

This article discusses business insurance and further explains whether it's illegal not to have business insurance, including professional and commercial general liability coverage, contents insurance, and more.


What is business insurance?

Business insurance is not a specific policy that you can buy. It encompasses many insurance products that small business owners purchase to mitigate their legal and financial risks. Insurers bundle these policies into business insurance plans, also known as a business owner's policy.

These insurance plans encompass coverages, such as professional liability, general liability, and contents insurance. It can also include cyber liability insurance and business interruption protection or provide these as options.

These policies cover your business' legal liabilities, such as a lawsuit for negligence, property damage, or bodily harm. Additionally, it can protect your business assets, like equipment and furniture.


What type of business insurance do I need?

To figure out what type of business insurance you should opt for, you can speak to a licensed business insurance broker in Canada about your specific needs. Every business is different, and therefore, it’s important to understand the different types of coverage a commercial insurance policy can encompass – so here’s a quick overview of a few popular types of protections. 

What is professional liability insurance? 

Professional liability insurance covers your business if someone sues you for negligence, misrepresentation, or a failure to adhere to promised standards while providing your professional services.

For example, you might miss a deadline, which delays your client's grand opening. As a result, your client faces costs that they look to you to compensate. Professional liability insurance could provide this compensation and cover affiliated legal fees.

What is commercial general liability insurance? 

Commercial general liability insurance (also known as general liability insurance or CGL) protects your business from lawsuits related to bodily injuries or property damage.

Suppose your office has a slippery floor due to people coming in from a winter storm. If you don't constantly mop the floor to keep it dry, someone might slip and get hurt. This person might then sue your business for medical fees, pain and suffering, lost wages, and more. Like professional liability insurance, general liability coverage can pay for any damages or legal costs.

What is contents insurance? 

Contents insurance replaces or repairs lost, damaged, destroyed, or stolen business assets. So, if someone steals your tools from your truck, and you're left needing to replace thousands of dollars in equipment, you won't have to worry about paying out-of-pocket – your insurance policy can cover replacement costs.

What is cyber liability insurance? 

Cyber liability insurance is a form of technology insurance that covers your company if malware, computer viruses, or hackers infiltrate your business infrastructure and lead to client losses.

In this case, your clients might sue because you were negligent in protecting their information. Cyber liability insurance functions similarly to other business liability policies and covers the cost of your lawsuit and related damage awards.

What is business interruption insurance? 

Business interruption insurance compensates you if your company faces an interruption. For example, suppose you have a retail store. If a fire occurs and you can't operate for an entire week, your business interruption policy can provide you with what you would have made that week. As a result, a fire you didn't start doesn't leave you with a loss.

Looking to insure your small business?

We've got you covered – get a personalized commercial insurance quote with us in just a few minutes.

Is general liability insurance required by law?

General liability insurance is not required by law. But, those you work with, like clients or landlords, might need you to purchase it to fulfill their contract terms. They might even ask to see a certificate of insurance before work begins.

For example, it's generally expected that construction workers have general liability coverage on their contractor insurance policy to fulfill their services. Clients don't want third parties to face injuries on their construction site – that third party may sue your client for bodily harm in this case.

With your insurance, injured people could sue your company instead, and your insurance company would pay legal costs and damage awards – not your client.

Landlords also commonly require you to have general liability insurance. Your general liability coverage means if someone slips at your office, garage, or warehouse, the injured person can sue you instead of the landlord.

If you don't have insurance, an injured person may try to sue your landlord for damages because your landlord has the money to pay legal fees and awards. This situation is prevented if your landlord mandates you have the correct general liability policy.


Do I need general liability coverage and professional liability insurance?

General liability insurance is still important even if you have professional liability coverage. Some clients require you to have both, and landlords usually want you to have general liability coverage.

General liability vs. professional liability

The difference between general and professional liability insurance is that general liability protects you from lawsuits related to bodily injury and property damage. On the other hand, professional liability insurance covers you in cases related to negligence.

General liability insurance can cover these situations:

  •   Someone trips over a cord in your office and hits their head
  •   A client or customer approaches your store and slips and falls on an icy doorstep
  •   You accidentally knock over your client's expensive vase while renovating or cleaning their home

In contrast, professional liability insurance can cover these instances:

  •   You miss an important deadline and delay the entire project
  •   Your work has an error, and the team needs to redo all the work
  •   Someone sues your client because your deliverable infringed on their copyrighted work

Having both policies provides coverage for more scenarios, ensuring your business can be as prepared as possible, in the event you face any unforeseeable circumstances.


The bottom line

Business insurance is ultimately not legally required but prudent to have. However, your business operations might require it due to the mandates of clients or landlords.

Get a free business insurance quote and purchase a business owner's policy in under five minutes with APOLLO insurance. Our online portal lets you quote, purchase, and bind a policy anywhere, on any device, and at any time.


Also read

Is business insurance mandatory in Canada?

What are the 4 types of business insurance?

Business insurance for photographers – what you need to know

The knowledge bank

A wealth of wealth knowledge delivered right to your inbox.

By submitting your email address, you acknowledge and agree to Ratehub.ca‘s Terms of Use and Privacy Policy. Contact us for more information. You can unsubscribe at any time.