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It was 10 years ago when I became a small business owner. I started small with this blog, but over the years, I’ve become a media consultant, freelance writer, brand ambassador and more. While growing my business, I’ve made a few mistakes but learned from them.
I would argue that my biggest mistake was not having enough insurance. I only looked into it because one of my clients required me to have a policy before I could be onboarded. It seems like I’m not the only one with this thinking, as a recent TD Survey found that many freelancers, entrepreneurs, and small business owners haven’t taken appropriate action to protect their businesses. I spoke with Tang Hung Trang, Vice President, Small Business Insurance at TD Insurance and he explains everything you need to know about small business insurance.
How important is it for solopreneurs and small business owners to have insurance?
Whether you run a hair salon or own your own photography studio, it can take a lot to run your small business. Business owners have the passion and drive to take on challenges, but they also need to protect what they’ve worked so hard to build. One way for small business owners to financially protect themselves from unforeseen events is through a customized business insurance policy.
A recent TD Insurance survey revealed that many small businesses are not taking the right steps to protect their business, putting themselves and their business at a greater risk for unexpected costs. Just over half of small businesses with one or more employees have small business insurance protection. This is even lower among solopreneurs (entrepreneurs who are the only employee of their business), where only 33 per cent have small business insurance protection.
What about freelancers who only work at home? Do they need insurance? Does their home insurance cover them?
Small business owners may believe that they don’t need insurance. For example, those who run a business out of their home may assume their homeowner’s insurance policy covers them, but that’s not always the case. The coverage limits in a standard home insurance policy may be much lower than the coverage you would receive through a business insurance policy. There are also certain types of coverage that your home insurance policy may not cover. For example, if your business is temporarily shut down due to an insured event, you may not be covered for any loss of income during this period.
Can you explain the difference between professional liability and commercial general liability insurance?
Commercial General Liability Insurance protects you and your business from financial losses caused by third party claims involving bodily injuries, property damage, as well as personal and advertising injury resulting from your products, services or operations.
Professional liability insurance, also known as errors and omissions insurance, is financial coverage related to claims associated with inadequate work or negligent action. This may include failing to provide services to a client in an agreed timeframe leading to your client suffering a financial loss.
Do business owners with employees need more insurance?
Small Business Insurance should be customized to specific business’ needs, and TD Insurance is set up to help small business owners understand their coverage options and create a tailored insurance plan. We recommend connecting with a licensed TD Insurance Advisor for advice on the right type of insurance that meets the unique needs of their business.
What’s the biggest misconception about insurance?
Many small business owners may not realize that they are not currently insured. For example, many business owners believe their personal auto policy automatically includes coverage for commercial usage, but that is not always the case. Often, small business owners require clarity on the insurance coverages they require for their business. This is supported by a recent TD Insurance survey, where 1 in 3 small business owners indicated they have a weak understanding of the types of insurance coverages specific to their businesses.
How much does small business insurance cost in general?
The cost of insurance is dependent on a range of factors including, but not limited to, the value of the company assets you wish to insure, the specific risks associated with your industry, and your previous claims history. With the recent launch of our digital quoter, we also offer small business owners the ability to get a quote online tailored to their specific business profile. In addition, they can also speak to a licensed TD Insurance advisor to determine the right insurance coverage customized to the unique needs of their business.
What’s the best way for people to get more information about insurance for their business needs?
Like I mentioned, we recommend for small business owners to speak with one of our licenced TD Insurance Advisors to learn more about our small business insurance products or visit TD Insurance for Business for more information.
Final thoughts
Small business insurance is no different from any other type of insurance. You hope you never need to use it, but you’ll be glad that you have it if you ever need to make a claim. What I’ve personally noticed as of late is that most of my clients require me to be insured before they take me on as a contractor. Small business insurance is relatively inexpensive and it counts as a business expense. It’s worth noting that small business insurance isn’t the only type of insurance you may need. You should also look into disability insurance, life insurance, and critical illness insurance.
FAQs
The big bucket represents your general aggregate limit, which is the maximum the insurance company will pay, regardless of claim quantity. The big bucket can fit up to $2 million worth of liability, regardless of the number of claims. As a liability claim happens, it will begin to fill up a small bucket.
Why is my business insurance so high? ›
Businesses operating in high-risk areas with higher crime rates may pay more for liability insurance. Size of payroll and annual revenue. The higher your expenses or operating costs, the more you can expect to pay for liability insurance. Claims history.
How much is a million dollar insurance policy for a small business? ›
On average, a $1 million liability insurance policy costs $69 a month, or $824 a year, for our small business owners. Keep in mind that every business is different, so the $1 million liability insurance cost will vary.
What does 5 million in aggregate mean? ›
Examples of aggregate limits
For example, your business insurance policy's aggregate limit is $5 million. If you filed four claims in one term that cost $1 million each ($4 million total), you would be under your aggregate limit.
What does 1 million per occurrence mean? ›
The per occurrence limit is the most the insurer will pay for damages resulting from one occurrence or claim. The policy will not pay for more than this limit for any one incident. A standard general liability policy will have a $1,000,000 per occurrence coverage limit.
What is the maximum aggregate amount? ›
The aggregate limit of liability is the maximum total amount your insurer will pay out for all such claims over the course of your policy term. It is a cumulative total, combining the sum of all payouts for all individual claims. Think of it as the ceiling on coverage you can get over the duration of your policy term.
Does business insurance go up after a claim? ›
If your business has a history of making claims for loss or damage, the insurance company will charge you higher premiums to cover the risk of insuring you. This is the case with any insurance policy. In their eyes, more claims in the past probably indicates more claims in the future.
Why is it so hard to get business insurance? ›
The answer is this: insurance companies only insure businesses that they know and understand. They will only insure classes of business that they believe will be profitable for them. They have data – lots of it – that shows what type of payouts they can expect to make, and therefore how much they should charge you.
Why do small business owners need insurance? ›
As a general rule, you should insure against things you wouldn't be able to pay for on your own. This coverage protects against financial loss as the result of bodily injury, property damage, medical expenses, libel, slander, defending lawsuits, and settlement bonds or judgments.
How much is $5 million liability insurance? ›
A $5 million umbrella policy costs around $375 to $525 per year, on average. Every policyholder's umbrella insurance premium will vary based on their personal risk factors, so individuals who own more cars or properties will be more expensive to insure, as will people who are particularly likely to be sued.
Business interruption insurance policies typically cover loss of income, rental value, or both. In general, business interruption insurance policies require a direct physical loss or damage to a property caused by a covered peril (i.e. fire, water damage, etc.) in order for business interruption coverage to apply.
What does $1 million liability cover? ›
A $1 million general liability insurance policy means your insurance company will provide financial protection for your business up to $1 million in covered losses or damages. Beyond that $1 million limit, you'll have to pay for costs out of pocket without the help of your insurer.
What are the three limits of insurance policies? ›
Insurance policies include various types of coverage limits—such as property damage liability, bodily injury liability, and personal property caps—and selecting the right limits is crucial to balance potential risks against personal assets and financial capacity.
What is umbrella insurance coverage? ›
An umbrella policy provides liability protection, which helps cover the cost of damage to another person's property or if they're injured, but it does not cover your possessions, such as your home or automobile.
What is the general liability limit? ›
General aggregate limit, sometimes called the “aggregate limit of liability,” is the maximum amount of money your insurance company will pay out for claims during a policy period.
What does aggregate mean on my insurance policy? ›
The maximum amount of money your insurer will pay for all the claims you file during the policy period, typically one year, is known as your aggregate limit. Aggregate limits are distinct from per-occurrence (or per-claim) limits. These refer to the maximum amount an insurer will pay for a single claim or incident.
What does aggregate mean in payments? ›
Merchant aggregation also known as payment aggregation, is a business model where a third-party payment provider signs up merchants directly under its own merchant identification number (MID) to process transactions through a single master account.
What does aggregate mean in insurance deductible? ›
Aggregate deductibles are often used in family health insurance policies and under them. An aggregate deductible means that the entire family deductible must be paid out of pocket before the company pays for services for one family member.
What does "in aggregate" mean for insurance? ›
Distinct from a per-claim limit, which states the amount an insurer will pay for each individual claim made during the policy period, the aggregate limit is the maximum amount an insurer will pay for all such claims made against the insured during the policy period, no matter how many separate claims might be made.
