Insurance - Your Bridge Over Troubled Waters

Something like 80% of all small businesses are not insured as well as they should be. Disasters like the New Orleans floods have given us thousands of examples where the 'basic' small business cover proved totally inadequate to cover losses - those businesses will never open their doors again.

Of course some types of insurance are mandatory in most jurisdictions - workers' compensation and vehicle third party liability insurance are two of these. The exact kinds of insurance you need will depend on your type of business, and it's true to say that no two businesses are exactly the same.

Here are some of the more common, and useful, types of insurance cover you can take out.

 

• Business Interruption - expenses incurred if the business is interrupted by fire or other natural events. A business may be forced to close for any number of reasons including a power failure, a fire to a neighboring business, a war or even the failure of a key supplier. Having business interruption insurance can save a business allowing it to continue covering costs such as salaries, utilities and rent, as well as lost profits, until the business reopens.

• Directors' and Officers' Liability - indemnifies officers and directors of the company for legal expenses and court costs incurred as a result of acting on behalf of the company

• Errors and Omissions - covers claims for commercial malpractice and for errors and omissions in providing services

• Health and Medical - covers health and medical needs for employees and their dependents

• 'Key Man' Life Insurance - a life insurance policy payable on the death of a key employee. This can include the owners of the business.

• Liability - liability for injuries to people or property caused by your company or by the actions or negligence of its employees

• Motor Vehicle - liability for injuries caused by your company's vehicles and by your employees' vehicles when used for business purposes

• Product Liability - liability in the event that an item manufactured or developed by your company is responsible for an accident, injury or death. There can always be a significant risk of injury from manufactured products. Safety measures and precautions taken in producing the product and explaining its use are factored in when determining your premium.

• Professional Liability - protects professionals from claims made against them personally for errors made while they are performing their services

• Property Damage - damage to your business property due to fire, wind, explosion, accidents, robbery or theft

• Workers' Compensation - covers injuries to employees for work related matters

This list is extensive but by no means comprehensive. Check your existing coverage against the list to make sure you have everything you need. You should also check the fine print in your existing policies thoroughly to be certain they actually provide the level of cover you need them to.

Many businesses carry 'umbrella' insurance packages that supposedly cover all the basic SME insurance needs. However, you should read the fine print carefully to make sure there are no gaps where your business specifically needs coverage. Also be sure to ask about the scope of the coverage, exclusions from coverage and the policy's deductible amounts. Insurance isn't worth a cent if it doesn't provide the cover you need when you need it.

Apprentice Job Creation Tax Credit

For the 2006 and subsequent taxation years, a taxpayer will be allowed an investment tax credit under Subsection 127(5) in respect of each eligible apprentice employed in the business after May 2, 2006 equal to the lessor of $2,000 and 10% of eligible salary payable. (Subsection 127(9) - "Eligible Salary and Wages") An eligible apprentice is an individual who is working in a prescribed trade in the first two years of the individual's provincially registered apprenticeship contract. A prescribed trade is a trade that is one of the 45 Red Seal Trades. The 45 Red Seal Trades are on www.red-seal.ca and includes trades such as bakers, carpenters, electricians, hairstylists, mechanics, machinists, plumbers, welders, etcetera. The Budget also proposes a new $1,000 grant for first and second year apprentices effective January 1, 2007.

Experimental Development (SR&ED)

Some things to consider when determining eligibility for SR&ED investment tax credits include:

1. You do not have to have a scientist working in a laboratory to qualify. The business owner and staff may be carrying on SR&ED activities.

2. A claim does not normally result in a CRA audit of other matters in the business. CRA will simply send a science consultant to determine if the claim qualifies as SR&ED. Next, they will send a financial reviewer to check the amount of the claim.