An insurance review checklist for a Canadian business sale covers confirming what coverage is currently in force, whether it transfers or needs to be rewritten for a new owner, the claims history behind it, and where common gaps sit — property, liability, business interruption, cyber and, for some sectors, professional or tail coverage — before a buyer relies on the seller’s description of what is covered.
Reviewed
A seller’s verbal summary of insurance coverage and the actual policy in force do not always match, and the gap tends to surface at the worst possible time — after a loss, once the new owner discovers what was never actually covered. This checklist covers what to verify about a business’s insurance before closing, as a companion to the asset and equipment checks covered separately.
Confirm what is actually covered today
Request current policy documents or a binder for every active policy, not a broker’s summary sheet or the seller’s recollectionA summary sheet can be out of date or incomplete, and only the actual policy documents show the coverage limits, exclusions and conditions that will matter if a claim is ever made.
Confirm coverage for property, general liability and business interruption, and check the limits against the actual value being insuredA policy limit set years ago and never revisited can sit well below what it would actually cost to replace the business’s equipment or cover a serious liability claim today.
Ask specifically about cyber liability coverage if the business stores customer data or relies on digital systems for revenueMany small business policies exclude data breach and ransomware costs by default, and a business with no dedicated cyber coverage is carrying that exposure entirely uninsured without anyone necessarily realizing it.
Review the claims history, not just the current policy
Request a loss run or claims history covering several years, not just confirmation that a policy is currently activeA pattern of recurring claims on the same type of loss — a leak, a slip-and-fall, equipment failure — points to an underlying operational issue a new owner inherits along with the coverage.
Ask directly whether any claim was denied, and if so, whyA denied claim usually points to either a coverage gap the seller did not know about or a compliance issue with how the policy was maintained, and either one is worth understanding before relying on the same coverage going forward.
Confirm the business’s claims history has not caused a coverage non-renewal or a significant premium increase that has not yet taken effectAn insurer that has quietly flagged an account for non-renewal at the next term is a cost a buyer should know about before finalizing a price, not after receiving the renewal notice.
Confirm what happens to coverage at closing
Confirm whether existing policies transfer to a new owner or need to be replaced with the buyer’s own coverage effective at closingCoverage rarely transfers automatically to a new legal owner, and a buyer who assumes it does can end up with an uninsured gap between the seller’s policy ending and their own beginning.
Where the business requires bonding or a specific professional or industry coverage, confirm how that coverage carries over or gets rewrittenBonding capacity and specialty coverage are often tied to the specific insured entity and its history, and losing access to them can affect what work or contracts the business can take on after the sale.
For a regulated or professional business, ask whether tail coverage is needed for claims arising from work performed before closingWithout tail coverage, a claim tied to something done before the sale can have no active policy responding to it once the seller’s own coverage lapses, leaving a gap neither buyer nor seller wants to discover after the fact.
Deavo is an advertising and listings platform, not a brokerage, law firm or valuation firm. This page is general information, not legal, tax, accounting or valuation advice, and rules differ by province. Confirm anything you rely on with a qualified professional before you act on it.