What you should know as a franchisee about insurance policies for your small business
By Jennifer Tyrwhitt Gory
While the average consumer is savvier than ever before, insurance may still be confusing for business owners. An insurance broker is an important professional intermediary who should be working on behalf of their client, with an unbiased representation of the consumer. They should suggest several insurance companies to choose from and provide the best possible insurance solutions for your needs.
An insurance broker should be carefully considered, in much the same you would do in selecting your lawyer, accountant, and other professionals you turn to for help when becoming a franchisee. However, there can be a real temptation for clients to choose insurance solely based on the premium, in order to control ever-important cash flow. Nevertheless, discovering that you have a lacklustre policy for your business—and the business income it generates—could happen too late. After you need your policy is not a wise time to investigate and discover that it’s an inferior one.
So, you’ve signed onto a new franchise opportunity, have the space selected, and the lease is signed. Now what? Your new landlord will need you to provide proof of insurance. The franchisor that you’ve signed on with may have a list of insurance brokers that they’ll have as their preferred vendors, or you can venture on your own. It’s important when you review your Franchise Agreement and the Lease Agreement that there’s indemnity wording contained in both documents, and you must be mindful of coverages and limits that your franchisor and/or landlord have asked of you. You can give these agreements to your insurance broker for review.
One emerging area of potential exposure is cyber security. Businesses are increasingly interested in Cyper Insurance, both first- and third-party liability coverage. This should be deemed more important than property and casualty lines of insurance. As some businesses have had to pivot to more online services, exposure to Ransomware attacks; PR services, should there be a privacy breach; and related business interruption claims around hacking incidents has increased. The most valuable aspect of a Cyber policy is having access to IT professionals who can assist you, as most small businesses may not have IT experts on staff.
Property, Business Interruption coverage, and Bonding and Liability coverages are other risks which are always prevalent. Fire and water damage claims continue to be on the rise, in addition to claims like slip and falls, contamination, and trademark infringement, to name a few. A full Commercial General Liability (CGL) policy covers both premises and products liability. If you’re considered a “professional,” in addition to the CGL, you’ll also need to carry Professional Liability coverage as the CGL policy excludes professional liability.
Additionally, there is the possibility for employers to be sued for Employment Related Practices, including discrimination, wrongful dismissal, and human rights issues. This coverage can be purchased by way of a Directors & Officers Liability insurance. Being a business owner comes with an increased risk of being personally sued for issues at the shareholder or corporate level. Canadian courts are showing an increased willingness to hold professionals to a higher standard of care.
Navigating insurance policies for your small business can be tricky, but a broker will offer valuable insight into what coverage will best fit your needs.
Jennifer Tyrwhitt Gory, is the president of Insurance Portfolio Inc., an independent family owned and operated insurance brokerage that’s been in business for more than 90 years. It brokers all types of insurance including Commercial Insurance, Professional Indemnity, Franchisor Liability including Rescission, Property & Automobile. Insurance Portfolio Inc. is licensed in all 10 Canadian provinces, and have been proud members of the CFA for over 15 years. It works with all types of franchisors, including bricks and mortar and online businesses.
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