Risks of Running a Business Without Insurance in Canada

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Author: Christian Sharda

Editor: Maryam Ajorloo, CPA

When you're hustling to get your business off the ground, it's tempting to skip business insurance. After all, insurance premiums don’t feel as urgent as paying suppliers or scaling your marketing. But here’s the truth: skipping insurance is a false economy. What you save upfront could cost you thousands, if not your entire business, down the line.

Let’s unpack the hidden costs of going uninsured by looking at three real-world scenarios and the coverage types that could’ve prevented disaster. We'll also show you how ReInvestWealth and our partner Zensurance help reduce complexity, save you money, and protect what you’ve built.

Three Real-Life Situations Where Lack of Insurance Cost Business Owners Big

1. The Freelancer Who Gets Sued Over an Honest Mistake

You’re a graphic designer. A client alleges your design misrepresented their brand, leading to lost business. You're hit with a lawsuit and legal fees, even though you had no ill intent.

If you skipped Professional Liability Insurance, you’re on your own.

Professional Liability Insurance (Errors & Omissions)

This type of insurance protects service providers like designers, consultants, advisors and therapists from financial and legal consequences stemming from professional errors or perceived negligence.

In a digital world where misunderstandings and disputes happen frequently, skipping this coverage is like walking a legal tightrope without a net.

And let’s not forget Cyber Insurance, especially relevant if your work involves client data or online platforms. It covers:

• Breach response

• Legal costs

• Ransomware and data recovery

• Client notification and credit monitoring

  
  

As CFIB puts it: "Insurance is like an umbrella. Although it doesn’t stop the rain, it protects and shelters you from its full impact.”

2. The Home-Based Entrepreneur Who Gets Denied a Claim

You’re running a home-based catering business. A client slips on your porch while picking up an order. You file a claim, only to find your standard home insurance doesn't cover business-related incidents.

Home-Based Business Risks: The Hidden Gaps

Most home insurance policies exclude:

• Business-related property (e.g., inventory, laptops, equipment)

• Third-party injuries linked to commercial activity

• Legal liability for services rendered

  
  

If you're working from home, even as a freelancer, you need business-specific coverage. Otherwise, a simple slip-and-fall could bankrupt you.

3. The Warehouse Fire That Shuts You Down for Months

You run a small e-commerce business. One night, a short circuit sparks a fire in your storage unit. Inventory is destroyed, operations halt, and customers demand refunds. You have property insurance, but not Business Interruption (BI) coverage. Now what?

You’re responsible for rent, payroll, refunds, and restocking, all without income. In this scenario, a lack of BI insurance turns a temporary setback into an existential crisis.

Business Interruption Insurance: Income Preservation

According to the Insurance Bureau of Canada (IBC), BI coverage helps businesses survive the downtime caused by insured losses like fires or floods:

• Gross Earnings: Replaces income until damaged inventory is replaced.

• Profits Form: Compensates until operations return to normal.

• Extra Expense: Covers costs of relocating or operating temporarily.

  
  

Without this safety net, you may have no choice but to tap into personal savings, or shut down entirely.

So, What Coverage Do You Actually Need?

According to the Insurance Bureau of Canada, a robust insurance plan might include:

• Commercial Property Insurance: Protects physical assets

• Business Interruption: Keeps cash flow running

• General Liability (CGL): Covers bodily injury and property damage

• Professional Liability (E&O): Covers service-based legal risks

• Commercial Auto Insurance: For vehicles used in business

• Cyber Insurance: Protects digital assets and customer data

  
  

Still unsure? CFIB’s guide encourages owners to work with specialized brokers and use government resources like IBC and FCAC to make informed decisions.

Insurance ≠ Contingency Planning (But They Must Work Together)

Even the best policy won’t help if your team doesn’t know what to do in a crisis.

Business continuity planning should include:

• Team and customer communication

• Secure data backups 

• Payment and payroll continuity 

• Equipment recovery strategies

  
  

Without a plan, even insured businesses suffer. But without insurance? You’re playing roulette.

Resolving Insurance Disputes

Worried about getting “burned” by an insurance company?

The General Insurance OmbudService (GIO) offers free bilingual dispute resolution for Canadian businesses with property or casualty insurance. Common issues include:

• Claim denials

• Unclear policy language

• Processing delays

  
  

But here’s the catch, you can only use GIO if you're insured. If you're not covered, you're not protected.

ReInvestWealth & Zensurance Partnership

At ReInvestWealth, we believe insurance and financial clarity go hand in hand. That’s why we’ve partnered with Zensurance, one of Canada’s leading digital insurance brokers, to make coverage easy, fast, and affordable.

Zensurance Clients

• 75% off ReInvestWealth AI accounting software for 12 months

• 24/7 AI Bookkeeper, income & expense tracking, receipt upload and smart dashboards

  
  

ReInvestWealth Users

• Up to 35% off insurance from Zensurance

• $20 gift card when applying online

  
  

Zensurance offers industry-specific coverage, competitive quotes, and a fully online experience. We handle your finances. They handle your risk.

Bonus: Insurance is Tax-Deductible

Did you know that business insurance premiums are tax write-offs? It’s true.

Our article on Top 10 Tax Write-Offs For Small Business in Canada explains how:

• Premiums for commercial, liability, and cyber insurance are deductible.

• Professional liability insurance (often listed under “professional dues”) counts too.

• Even freelancers and side-hustlers can claim these costs.

Insurance as a Strategic Asset

In his LinkedIn piece, Marcin Majka writes: “Insurance is a critical tool in managing and mitigating risks. Its strategic integration into personal and business risk management frameworks enhances resilience, promotes stability, and provides a financial safety net.”

Too often, insurance is treated as a reluctant expense, something you pay for and hope you never need. But when approached intentionally, it becomes a strategic asset: strengthening your risk posture, supporting business continuity, and increasing your credibility with lenders, partners, and clients alike.

Final Thoughts: Fragile vs. Future-Proof

Skipping insurance might feel like you're cutting costs. But in reality, you’re cutting corners on sustainability. With tools like ReInvestWealth and partners like Zensurance, you don’t have to choose between protection and affordability. You can have both. Build a business that lasts. Protect what matters most.

Frequently Asked Questions

1. What type of business insurance do I actually need?

At minimum, most small businesses should consider:

• Commercial Property Insurance – to protect physical assets

• Business Interruption (BI) – to cover income loss during downtime

• General Liability (CGL) – for third-party injuries or property damage

• Professional Liability (E&O) – for service-based businesses

• Cyber Insurance – to safeguard digital data and respond to breaches

  
  

2. What’s the difference between ‘Gross Earnings’ and ‘Profits Form’ in Business Interruption Insurance?

Both are BI (Business Insurance) coverage options, but they differ in scope:

• Gross Earnings: Covers lost revenue only until damaged property is replaced or restored

• Profits Form: Covers lost net income until your business returns to normal operations, even if that takes longer

If you’re in a service-based or seasonal business, the Profits Form may offer stronger financial protection over a longer period.

3. Does my home insurance cover my business if I work from home?

Usually, no. Standard home insurance typically excludes:

• Business-related property like laptops, cameras, or inventory

• Client injuries on your property

• Legal liability from professional services

Whether you’re a freelance designer or a home-based caterer, you’ll likely need separate home business insurance. Otherwise, you risk claim denials that could wipe out your savings.

4. Is business insurance actually tax-deductible?

According to ReInvestWealth’s Tax Write-Off Guide, most business insurance premiums are deductibles.

5. What if I have a dispute with my insurance provider?

The General Insurance OmbudService (GIO) offers free, bilingual dispute resolution for Canadian businesses with property or casualty insurance.

Common disputes include:

• Denied claims

• Ambiguous policy language

• Delayed processing

But the catch is you must be insured in the first place. No policy? No protection. That’s why coverage isn’t optional, it’s foundational.

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Disclaimer

The content of this blog post is for informational purposes only and does not constitute accounting, tax, business, or legal advice. While ReInvestWealth offers professional accounting and tax advice through paid consultations with a CPA, the information provided here is general in nature and may not be applicable to your specific circumstances.