Liability Insurance FAQs

Many Canadian entrepreneurs search this when starting a business.

Liability insurance is usually not legally required, but it is commonly required by:

• Landlords
• Commercial leases
• Government contracts
• Clients or vendors

Without coverage, businesses must pay legal costs and damages themselves if sued.

Coverage limits depend on risk level, industry, and contracts.

Typical starting limits are:

• $1M–$2M for many small businesses
• $2M–$5M for higher-risk industries or larger contracts

Some businesses purchase umbrella liability coverage for additional protection.

This question captures people comparing policies before buying.

Key difference:

• General Liability: covers bodily injury and property damage claims.
• Professional Liability (E&O): covers financial losses caused by mistakes, negligence, or professional advice.

Many service-based businesses require both.

People often search this after reading coverage explanations.

Common exclusions include:

• Professional errors or negligence
• Damage to your own property
• Employee injuries
• Intentional acts or criminal activity

Businesses may need additional policies such as professional liability, property, or cyber insurance.

This question targets business owners trying to determine if they need coverage.

Most businesses benefit from liability insurance, especially those that:

• Interact with customers or the public
• Visit client locations
• Sell products
• Operate a storefront or office

Even small incidents can lead to lawsuits and expensive legal fees.

Examples of common liability claims include:

• A customer slipping and falling at your business location
• Accidental damage to a client’s property while performing work
• Injuries caused by a product you sell
• Claims of defamation, libel, or slander related to advertising

Commercial General Liability insurance helps cover legal defence costs and settlements related to these claims.

If an incident occurs, the typical claims process includes:

• Reporting the incident to your insurance provider as soon as possible
• Providing details about what happened
• Submitting supporting documentation such as photos, contracts, or reports
• Working with the insurer while the claim is investigated

An insurance broker can guide you through the process and communicate with the insurer on your behalf.

Yes. Many businesses bundle liability insurance with other coverages through a Business Owner’s Policy (BOP), which may include:

• Commercial property insurance
• Business interruption insurance
• General liability insurance

Bundling policies can simplify coverage and sometimes reduce premiums.

Yes, many home-based businesses purchase liability insurance because home insurance usually does not cover business-related claims.

For example, if a client visits your home office and is injured, or your work damages a client’s property, your personal home insurance policy may not cover the claim.

Insurance providers consider several factors when calculating premiums, including:

• Industry and level of risk
• Business revenue
• Number of employees
• Location and operations
• Claims history
• Coverage limits selected

Higher-risk industries such as construction or manufacturing may pay higher premiums than low-risk professional services.

Commercial General Liability insurance does not cover every type of risk. Most policies typically do not cover:

• Professional mistakes or negligence (covered by Errors & Omissions insurance)
• Employee injuries (covered by workers’ compensation)
• Damage to your own business property
• Auto accidents involving business vehicles
• Intentional or criminal acts

Understanding these exclusions helps businesses determine whether they need additional policies to fully protect their operations.

Liability insurance is not legally required for most businesses, but many landlords, clients, and contracts require proof of coverage before allowing you to operate or work on-site.

For example, contractors, event vendors, and service providers are often required to carry at least $1M–$2M in liability coverage to meet contractual obligations.

The cost of liability insurance depends on several factors, including:

• Industry and risk level
• Business size and revenue
• Number of employees
• Claims history
• Coverage limits and deductibles

Low-risk businesses may pay a few hundred dollars per year, while higher-risk industries like construction may pay significantly more. Insurance brokers can compare multiple insurers to find competitive pricing.

Many small businesses carry $1 million per occurrence and $2 million aggregate limits as a starting point.
However, higher limits may be recommended if your business:

• Works on client property
• Manufactures or sells products
• Has frequent public interaction
• Signs contracts requiring higher coverage

Some companies also purchase umbrella liability insurance to increase protection beyond standard policy limits.

Yes. Liability insurance is available for sole proprietors, freelancers, contractors, and small businesses.

Even businesses without a physical storefront may still face liability risks such as:

• Damaging a client’s property
• Causing injury while performing work
• Advertising or copyright claims

Liability insurance helps cover legal defence costs and settlements if these claims occur.