Finding out your co-operative insurance needs

Starting a business comes with risk. From an operations perspective, a co-op is not much different than any other type of business. However, as an incorporated entity, a co-operative can be more complex depending on its size and mandate. Finding the right co-operative insurance provider and plans to protect the business and its people will help guard against unexpected incidents and give the co-op’s board and management some peace of mind.

It’s important to figure out what kind of co-operative insurance your business needs. In some cases, a co-op may require a specific kind of insurance policy. Housing co-ops, for example, maintain insurance policies that cover the buildings, machinery, and common areas owned by the co-op. Working with an insurance broker to figure out what type of insurance you need is often a wise decision.

Insurance for Assets

Buying insurance to cover damages to the co-op’s property minimizes unexpected replacement costs and limits the impact incidents have on the co-op. Here are some insurance options that cover damages to a co-op’s assets:

• Property: If the co-op owns land and buildings, it is essential to have property insurance to guard against natural disasters, damage, and fires.
• Contents: If the co-op owns equipment, inventory, or any capital assets other than buildings, you should have content insurance to cover the cost of replacing items that are essential to the business.
• Business interruption: This insurance will help protect the bottom line. If you need to close your co-op due to damages, like a fire, business interruption insurance will cover any earnings the co-op misses out on during its closure. If your co-op can stay up and running in the event of a fire or other incident, this insurance might not be necessary.
• Vehicle: If the co-op owns a vehicle, it’s best practice to get that insured. The drivers’ personal auto insurance might not cover all situations.

Liability Insurance

Your co-op likely conducts business where mistakes can happen. Liability insurance protects the co-op if it is sued and found liable for damages. The cost of this insurance is based on the risk of a lawsuit stemming from the co-op’s ordinary operations. Consider the following options that cover situations where the co-op could be liable for damages:

• General: This is a standard option for any co-op that interacts regularly with staff or consumers and should include all forms of personal injury.
• Product: If your co-op exists to create and sell products, product liability insurance covers damages that result from products harming consumers or being defective.
• Professional: If your co-op, its members or staff provide professional services (e.g. consulting) to clients, obtain professional liability insurance to protect against lawsuits from negligence or errors and omissions.
• Cyber: If your co-op manages personal client or employee data online, it runs the risk of being hacked. Cyber liability insurance protects the co-op from lawsuits from individuals whose information was compromised while held by the co-op.
• Director: This is a standard requirement for most co-ops. Director liability insurance protects the co-op and its board from damages resulting from lawsuits stemming from decisions made by the board.

Other Types of Insurance

Other types of insurance your co-op should consider purchasing are:

• Accounts Receivable: If your co-op allows consumers to defer payment for goods, there’s a risk they may not pay. Accounts receivable insurance allows the co-op to recover these costs and stay protected from lost revenue.
• Export: If your co-op sells goods to international consumers, you might want to explore the export insurance offered by the Government of Canada. Like accounts receivable insurance, export insurance covers lost revenue resulting from consumers that cannot or will not pay for goods.

In addition to the policies your co-op might purchase to protect its own assets and operations, the co-op might consider providing a health insurance plan to its employees. Employers can bundle health plans for employees, which makes them more affordable than individual health coverage. This is a common workplace practice and the incentive of extra health coverage can help you retain staff. Most insurance brokers provide group health plans that can be customized to the needs and budget of your co-op.

Selecting a Broker

Selecting the right insurance broker is just as important as identifying the right insurance. Choose a broker that can provide the coverage you need, at a reasonable price, with a level of service that feels right. We recommend getting quotes from a few different insurance providers to compare prices. This means doing some legwork but is well worth it.

Try to find an insurer that can meet multiple needs of the co-op. Insurers that also offer personal insurance and financial planning can save you and your employees/members time and effort. It can also save you money. It might also be helpful to check with your local Chamber of Commerce. Chambers often negotiate group coverage on behalf of their members.

Important Tips

Once you receive a quote from a co-operative insurance provider, ask some additional questions to make sure you’re getting the coverage you need. Asking the following questions might help when reviewing quotes:

• Is the coverage sufficient? Does the coverage adequately cover the replacement cost of the co-op’s property?
• Is the cost reasonable? A quick online search will identify premiums for similar firms; its best to ensure the quote you received is consistent with industry standards.
• Is there anything missing in the coverage? Insurance quotes typically include a long list of coverages; make sure this list includes all possible scenarios that might impact your business.
• Is the deductible too high? The deductible shouldn’t exceed the cost of replacing the insured goods.
• Is there a financing fee? If you don’t pay the annual premium upfront and instead make monthly payments, the insurer might charge you a financing fee. If you think this fee is too high, it might be worth it to pay the premium upfront or negotiate a plan with the insurer.
• Are there any hidden, unusual clauses? Don’t be afraid to ask questions. Ask your insurer any outstanding questions you might have about a policy. Think of hypothetical situations that might arise and ensure the policy and the insurer’s process provide what you need.

Most insurance policies cover one year, but you may get better rates by signing up for multi-year policies.

Switching providers

It’s up to your board to decide if the co-op stays with the same insurer or switches to another provider. Switching providers is a straightforward process but does require some time and thought. Making an assessment 3-4 months before your policy is up for renewal should give you time to explore options and make an informed decision. You can task the co-op’s finance and audit committee with monitoring and recommending changes to the co-op’s insurance coverage. This will ensure the task is completed without taking up too much time on the board age

Find this tool on co-operative insurance useful? Check out our tool on understanding those pesky financial statements or our blog on limiting your co-op’s liability.

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