Tips to maximize insurance coverage for small retail businesses

5 minute read  

Starting a retail business—whether it’s a cozy little store, an online store, or a home-based venture—is exciting. However, it comes with its own set of challenges and risks. From unexpected accidents and theft to cyberattacks, retail businesses face numerous threats that require the right insurance coverage.

Having the right insurance is crucial to protect your business. Here’s a simple guide to the essential types of insurance you need, what they cover, and practical tips to minimize risks and avoid claims.

Types of insurance for retail businesses

Commercial general liability insurance

Accidents can happen anytime. Imagine a customer slipping on a wet floor or a passerby twisting an ankle in a pothole in your parking lot – both could lead to lawsuits for bodily injuries. Similarly, if your delivery truck accidentally dents a client’s garage door or a leak from your septic system causes foul-smelling sludge to flood a nearby office, you could face property damage claims.

Commercial general liability (CGL) retail insurance protects your business from legal costs and damages if a third-party, such as a customer or visitor, suffers an injury or property damage at your store.

Tips to minimize risks and prevent accidents like trips, slips and falls:

Regular inspection: Check the entrance, exit, sidewalks, parking lots, and patios associated with your retail store. Remove obstacles or debris that could cause trips, slips, or falls, and repair or replace damaged surfaces.
Stairway safety: Ensure all handrails on stairways are secure and in good condition.
Adequate lighting: Install sufficient lighting to help customers and passersby navigate safely to your store, sidewalk, patio, and parking lot.

Scheduled maintenance: Perform regular maintenance on your property and keep detailed records of when and by whom it was done.

Product liability insurance

As a business owner, you’re responsible for every product you sell. If a product is faulty or causes an injury or property damage, whether you made it or bought it wholesale, your business could face costly legal actions.

For example, if you sell gift baskets with your handmade jams, spreads, and sauces and one jar gets contaminated with bacteria, anyone who gets sick could sue you for bodily injuries. While product liability insurance can help with the lawsuits that might follow, it won’t cover the costs of recalling the contaminated product. For that, you’d need product recall insurance.

Similarly, if you sell electric scooters and a faulty battery causes a fire that damages a customer’s property, you could be held liable. Product liability insurance can help protect your retail business from such damages.

Tips to recover from product mishaps: If you unintentionally introduce a hazard into one of your products, you risk permanent damage to your reputation and your business unless you act quickly. If you need to institute a product recall:

Identify the products: Determine which products need to be recalled.
Assemble a team: Gather qualified personnel with sufficient authority to help coordinate the recall.
Notify authorities: Report the defective product to the proper authorities, such as a Health Canada Product Safety Officer or a Canadian Food Inspection Agency.
Customer actions: Determine the actions your customers should take.
Distribute recall notices: Prepare and send a recall notice to all affected customers.
Collect and dispose: Collect and properly dispose of all recalled products.

Commercial property insurance

While damage to buildings can disrupt operations, theft remains a persistent issue for retail businesses in Canada, with both customers and employees contributing to the losses.

Commercial property retail insurance is designed to protect both the building you operate from and all the physical assets within, such as equipment, furnishings, and inventory. When damage, destruction, theft or other covered losses occur, the right commercial property insurance policy can help you repair or replace items and get you back up and running quickly.

Tips to reduce theft risks:

Install security cameras: Adjust lighting to monitor and record footage from every corner of your store at various heights and angles. Retain all security footage for at least six months.
Post signage: Place signs about the consequences of theft high-up, near security cameras, to capture clear, full-face images of potential shoplifters.
Use electronic tags: Attach electronic tags to all merchandise to detect theft.
Secure expensive items: Keep valuable items near checkout counters or behind locked doors in display cases.
Foster a loss prevention culture: Encourage an employee culture that prioritize loss prevention. For safety reasons, only trained security professionals should approach suspected shoplifter.

Cyber risk insurance

Cybercrime is a growing threat in Canada. Strengthening cybersecurity can be daunting, but not securing your data could be vastly more expensive. In 2024, the average cost of a data breach in Canada reached CA$6.32 million, with the financial sector experiencing even higher costs, averaging CA$9.28 million per breach. Without proper protection, a single cyberattack could lead to costly lawsuits, reputational damage, and significant operational disruptions.