What Insurance Do Ontario Small Businesses Actually Need?

Updated October 2026

Starting and operating a small business involves considerable responsibility.

Whether you operate a retail store, provide professional services, work as a contractor or run a business from your home, there are risks that could result in substantial financial losses.

An unexpected fire, a customer injury, a lawsuit, stolen equipment or a cyberattack can disrupt operations and threaten the financial stability of a business.

Insurance can help protect against many of these risks, but choosing the right coverage is not always straightforward.

One of the most common questions we hear is:

What insurance does my small business actually need?

The answer depends on what your business does, where it operates, the property it owns, the services it provides and the risks associated with its activities.

At L.D. Dermody Insurance Brokers, we work with Ontario businesses to help them understand their exposures and arrange appropriate insurance coverage.

Here are ten important areas to consider.

1. Commercial General Liability Insurance

Commercial General Liability insurance, commonly referred to as CGL, is one of the most important coverages for many businesses.

It generally provides protection against certain claims involving bodily injury or property damage suffered by third parties as a result of the business's covered operations.

For example:

A customer slips and falls in your store.
An employee accidentally damages a customer's property while performing work.
Your business operations cause damage to neighbouring property.
A customer alleges that a product sold by your business caused injury.

Depending on the circumstances and policy wording, CGL insurance may cover legal defence expenses and damages for which the business is legally responsible.

However, CGL insurance does not cover every type of lawsuit or financial loss.

For example, it generally does not replace professional liability insurance for claims involving certain errors in professional advice or services.

How Much Liability Insurance Do You Need?

Many small businesses carry liability limits of $2 million, although higher or lower limits may be available or appropriate.

Some landlords, customers and commercial contracts require a specified minimum amount of liability insurance.

The appropriate limit depends on factors such as your operations, contractual obligations and potential exposure to significant claims.

A business should not select its liability limit based solely on the minimum required by a landlord or customer.

2. Commercial Property Insurance

If your business owns or uses physical property, commercial property insurance is an important consideration.

Depending on the policy, this coverage may protect:

Buildings owned by the business.
Office furniture.
Computers and electronic equipment.
Machinery.
Inventory and stock.
Business fixtures and improvements.
Other insured business contents.

For example, a fire could destroy the equipment and inventory inside a retail store.

Commercial property insurance may respond to the resulting damage if fire is an insured peril under the policy.

However, the extent of coverage depends on the policy's terms, conditions, exclusions, limits and deductibles.

What if You Lease Your Business Premises?

Even if you do not own the building, you may still need commercial property insurance.

Your landlord's insurance generally protects the landlord's interests, not necessarily your business's equipment, stock or improvements.

A tenant may also have contractual responsibilities for certain damage to leased premises.

Before signing a commercial lease, review its insurance requirements with your broker and legal adviser.

3. Business Interruption Insurance

Many business owners understand the importance of insuring their property but overlook what happens when they cannot operate following a loss.

Suppose a fire damages your business premises.

Your property insurance may cover insured physical damage, but what happens to your revenue while repairs are being completed?

You may still have expenses such as:

Rent or mortgage payments.
Employee wages.
Loan payments.
Utilities.
Other continuing operating costs.

Business interruption insurance may help replace certain lost business income and cover specified continuing expenses when operations are interrupted by insured physical damage.

The coverage generally requires an insured cause of loss and is subject to the policy's conditions.

It is not a general guarantee against all interruptions or declines in revenue.

For example, a slowdown caused by reduced customer demand would not ordinarily be covered simply because the business has business interruption insurance.

How Long Would Your Business Need to Recover?

When reviewing business interruption coverage, consider how long it could take to:

Repair or rebuild your premises.
Replace specialized equipment.
Restore inventory.
Obtain necessary permits.
Reopen and return to normal operations.

The period of indemnity and coverage limits should reflect the business's realistic recovery needs.

4. Commercial Automobile Insurance

If your business owns vehicles, commercial automobile insurance may be required.

Commercial automobile insurance can apply to vehicles such as:

Delivery vans.
Service trucks.
Company cars.
Commercial trailers.
Vehicles used for transporting equipment or materials.

However, business vehicle exposures are not limited to vehicles registered in a company's name.

If you use your personal vehicle for business purposes, your automobile insurer should be informed.

Some business use may be acceptable under a personal automobile policy when properly disclosed and rated, while other activities may require different insurance arrangements.

For example, occasional travel to meet clients may be treated differently from operating a delivery service.

Do not assume that a personal automobile policy automatically covers every type of business use.

Businesses should also discuss situations where employees use their own vehicles for work or where the company rents vehicles.

Depending on the circumstances, additional liability coverage may be appropriate.

5. Cyber Insurance

Cybercrime is not a risk faced only by large corporations.

Small businesses can also be targets of:

Ransomware.
Phishing attacks.
Business email compromise.
Fraudulent payment instructions.
Data breaches.
Unauthorized access to business systems.
Theft of sensitive customer information.

A cyber incident can result in significant costs, including system restoration, professional assistance, business interruption and potential liability claims.

Cyber insurance may provide coverage for certain expenses arising from covered cyber incidents.

Depending on the policy, available protection may include:

Incident response assistance.
Forensic investigation expenses.
Data recovery costs.
Legal and notification expenses.
Certain cyber-related business interruption losses.
Liability arising from covered privacy or security incidents.

However, cyber policies vary considerably.

Not every cyber policy covers every form of online fraud, and coverage for stolen or fraudulently transferred funds may be limited or require specific endorsements.

Businesses should review cyber insurance alongside their cybersecurity practices.

For more information, see our article Cybercrime.

6. Professional Liability Insurance

Some businesses face financial risks that are not adequately addressed by Commercial General Liability insurance.

Professional liability insurance, sometimes called Errors and Omissions insurance, is designed to address certain claims arising from alleged mistakes, negligence or failures in the provision of professional services.

Businesses that may need this coverage include:

Consultants.
Accountants.
Designers.
Technology service providers.
Professional advisers.
Other businesses providing specialized services.

For example, a consultant might be accused of providing incorrect advice that caused a client financial loss.

A CGL policy generally focuses on certain bodily injury and property damage exposures and may not respond to a claim involving purely financial loss from professional advice.

Professional liability coverage may be appropriate for that exposure.

Coverage varies by profession and policy, and some professional liability policies operate on a claims-made basis.

This makes policy continuity and reporting requirements particularly important.

7. Tools, Equipment and Contractors Insurance

Contractors and tradespeople often have exposures that differ from those of other small businesses.

Consider an electrical contractor who owns thousands of dollars' worth of tools and equipment.

Those tools may be stored in a workshop, carried in a vehicle or used at different job sites.

A standard commercial property policy may not provide adequate coverage for equipment while it is away from the insured premises.

Contractors may need additional protection for:

Tools and portable equipment.
Mobile machinery.
Equipment transported between locations.
Materials awaiting installation.
Property at job sites.
Certain installation or construction exposures.

Coverage for tools and equipment can have specific limits, deductibles and theft conditions.

For example, theft from an unattended vehicle may be subject to restrictions.

Contractors should also review their liability insurance to ensure it reflects the actual work they perform.

An insurer that accepts one type of contracting operation may not necessarily insure another.

For more information, see our article Small Contractors: Are You Properly Insured for Your Work?

8. Home-Based Business Insurance

Operating a business from home does not necessarily mean your homeowners insurance will cover it.

Many home insurance policies provide limited protection for business property and may restrict or exclude liability arising from business activities.

Examples of home-based businesses include:

Bookkeeping and consulting.
Online retail sales.
Personal services.
Home-based manufacturing.
Tutoring.
Certain childcare operations.

The insurance requirements depend on the nature and scale of the business.

For example, a person working remotely for an employer may have different exposures from someone operating a business that stores inventory and regularly receives customers at home.

Depending on the activities, an insurer may offer an endorsement to the homeowners policy or require a separate commercial insurance policy.

If you operate a business from home, tell your insurance broker what you do, whether customers visit and what equipment or inventory you keep on the premises.

Do not assume that registering the business at your home address makes it automatically covered.

9. Contractual Insurance Requirements

Many businesses are required to carry insurance under contracts with landlords, customers, general contractors or other organizations.

A contract may require:

Commercial General Liability insurance.
A specified liability limit.
The other party to be added as an additional insured.
Particular endorsements.
Evidence of insurance through a certificate of insurance.
Coverage for specific operations or exposures.

It is important to understand that a certificate of insurance is evidence of insurance; it does not, by itself, create or expand coverage.

Similarly, an additional insured requirement must be addressed through appropriate policy wording or endorsements where available.

A business should not assume that every contractual insurance requirement can be satisfied by its existing policy.

Review Insurance Requirements Before Signing

Some contracts impose obligations that are broader than the insurance coverage a business carries or can reasonably obtain.

For example, a contract may require a business to assume liability for losses beyond those ordinarily covered by its CGL policy.

Before agreeing to contractual insurance requirements, discuss them with your broker and obtain legal advice where appropriate.

For more information, see our article Why It's Critical to Vet Contractors and Request a Certificate of Insurance.

10. Review Your Insurance as Your Business Changes

One of the most important responsibilities of a business owner is keeping the insurance company informed about significant changes.

A policy arranged when the business first opened may no longer be appropriate several years later.

Changes that should be discussed with your broker may include:

Increased annual revenue.
Changes in payroll.
Hiring additional employees.
Expanding into new products or services.
Purchasing additional equipment.
Moving to larger premises.
Opening another location.
Taking on different types of contracts.
Working outside Ontario.
Beginning online sales or deliveries.
Changing the ownership or legal structure of the business.

Insurance companies use information about business operations to assess risk and determine premiums.

If the business begins performing activities that were not disclosed when the policy was arranged, coverage issues may arise.

For example, a contractor insured for residential painting who begins undertaking roofing work should not assume the existing policy automatically covers the new operations.

The insurer should be advised so the exposure can be reviewed.

Is Business Insurance Mandatory in Ontario?

There is no single rule requiring every Ontario small business to purchase the same commercial insurance package.

However, certain types of insurance may be legally required, while others may be necessary to meet contractual or professional obligations.

For example:

Automobile Insurance

Vehicles used on public roads must meet applicable automobile insurance requirements.

Workplace Safety and Insurance

Many Ontario businesses are required to register with the Workplace Safety and Insurance Board (WSIB) and maintain applicable workplace insurance coverage.

Requirements and exemptions depend on the industry, business structure and circumstances.

Professional Insurance

Certain regulated professions may be required to maintain specified professional liability coverage.

Contractual Requirements

Landlords, lenders, customers and other parties may require particular insurance coverages.

Even where insurance is not legally mandatory, operating without adequate protection can expose a business to substantial financial loss.

Business owners should confirm which legal and contractual requirements apply to their particular operations.

What About Employees and Workplace Injuries?

Businesses with employees should understand their obligations concerning workplace injuries.

In Ontario, WSIB coverage is mandatory for many businesses, although requirements and exemptions vary.

WSIB coverage is different from Commercial General Liability insurance.

A CGL policy is not a substitute for required workplace insurance.

Employers should also consider other potential exposures, including employment-related claims.

Depending on the business, Employment Practices Liability insurance or other specialized coverage may be worth discussing.

Do You Need Crime or Employee Dishonesty Insurance?

Businesses can experience financial losses resulting from theft, fraud and dishonest acts.

Commercial crime insurance may provide coverage for specified losses, depending on the policy.

Examples can include:

Employee theft.
Theft of money or securities.
Certain forms of forgery.
Other covered dishonest acts.

However, commercial crime coverage is not identical to cyber insurance.

For example, losses caused by fraudulent electronic funds transfers may be addressed differently depending on the wording and endorsements purchased.

Businesses that regularly handle payments, customer funds or valuable inventory should review these exposures carefully.

How Much Business Insurance Do You Need?

There is no universal answer.

The appropriate coverage depends on factors such as:

Your industry.
Annual revenue.
Payroll and number of employees.
Value of business property.
Type of services provided.
Potential liability exposures.
Contractual obligations.
Location and geographic scope of operations.
Financial ability to absorb a loss.

For commercial property insurance, limits should reflect the value of the property being insured and applicable valuation provisions.

Some policies include co-insurance clauses that can affect claim payments when the amount of insurance carried is insufficient.

For more information, see our article Don't Let Co-Insurance Cause Your Claim to Be Underpaid.

When selecting liability limits, consider not only contractual minimums but also the potential severity of claims arising from your operations.

What Information Will an Insurance Broker Need?

When requesting a business insurance quotation, be prepared to provide information such as:

Legal business name and operating name.
Business address.
Description of operations.
Years in business.
Annual gross revenue.
Annual payroll.
Number of employees.
Details of subcontracted work.
Business property and equipment values.
Information about company vehicles.
Previous insurance and claims history.
Contractual insurance requirements.
Locations where work is performed.

Additional information may be required depending on the type of business.

Providing complete and accurate information helps insurers evaluate the risk and allows your broker to identify suitable coverage options.

Why the Cheapest Business Insurance Policy May Not Be the Best

Commercial insurance policies can differ substantially between insurance companies.

Two quotations may appear similar but contain important differences in:

Coverage limits.
Deductibles.
Exclusions.
Business activities accepted.
Property valuation.
Business interruption protection.
Coverage for tools away from the premises.
Professional liability protection.
Contractual liability provisions.

A lower premium may be attractive, but it is important to understand what coverage is being provided.

An insurance policy that does not adequately reflect your actual business operations may offer little value when a serious claim occurs.

Protecting Your Business Starts With Understanding Your Risks

Every small business faces different challenges.

A retail store needs to protect its inventory and premises.

A contractor may need liability insurance and protection for tools at job sites.

A consultant may require professional liability insurance.

An online business may have significant cyber exposures.

And a growing business may need to adjust its insurance as operations expand.

The right insurance program should reflect what your business actually does, not simply fit into a generic package.

At L.D. Dermody Insurance Brokers, we help Ontario small business owners understand their insurance needs and review the coverage options available through the companies we represent.

Whether you are starting a new business, reviewing an existing policy or expanding your operations, we can help you identify important insurance considerations.

If you have questions about your business insurance, contact L.D. Dermody Insurance Brokers. We would be pleased to discuss your operations and help you explore appropriate coverage options.

This article provides general commercial insurance information for Ontario businesses as of October 2026. Insurance availability, eligibility, coverage, limits, deductibles and exclusions vary by insurer and policy. Legal, contractual, workplace safety and professional insurance requirements should be confirmed with the appropriate authorities and advisers.