Whether it’s cyber-attacks, lawsuits, fires or even theft, no one is immune. These are all unpredictable events. So how do you protect yourself against them? One simple answer is to take out an insurance policy.
Although it is possible to put in place controls within your organization to reduce these risks (e.g., digital risk controls or the installation of company cameras), these are not always sufficient, which is why it is important to take out insurance.
The benefits of a corporate insurance policy
Taking out an insurance policy has a number of advantages. In particular, it gives you a degree of financial security in the event of major loss or theft, and continuity in the event of disaster (fire, accident, computer hacking, etc.). It can also help you meet your regulatory and professional obligations.
However, taking out an insurance policy is not enough in itself. You need to make sure that the policy you take out contains cover that is specific and sufficient to the reality of your business. What’s more, just because the coverage was adequate one year doesn’t mean it will be the next. In fact, as your company’s level of activity increases, so does the need to adjust your insurance coverage.
The following is a non-exhaustive list of examples of situations where insurance coverage should be increased:
- Increase in assets: purchase of more inventory, new materials, equipment, premises or vehicles, etc.
- Geographic expansion: new branches, new offices, new sales outlets, etc.
- Increase in sales
- Coverage of new risks: online sales, international expansion, etc.
The importance of insurance for managers
It’s also worth noting that having a liability insurance policy for the officers and directors of a corporate or not-for-profit board of directors is crucial. It protects directors and officers against personal liability and financial loss arising from actual or alleged misconduct. Without it, you may find it difficult to recruit.
A company may also be the beneficiary and owner of a life insurance policy. In this case, the shareholder is the covered person. The company pays the insurance premiums and receives the insurance proceeds upon the death of the covered person. However, before taking out such insurance, we advise you to call your tax advisor, as there are certain tax implications associated with this type of insurance. You should therefore check whether it would be advantageous for you from a tax standpoint before making such a decision.
Prevention is better than cure
Our assurance, tax and consulting teams are available to help you analyze your risks. They will support you and advise you on the implementation of various systems and control mechanisms designed to reduce risks, while ensuring that your business is adequately insured. Remember: prevention is better than cure!
An article by Marie-Pier Poirier, CPA auditor
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