Is CGL Insurance Mandatory in Canada?
When it is required, when it is optional, and why most businesses carry it regardless
If you are starting or growing a business in Canada, insurance questions come up early. One of the most common is whether Commercial General Liability (CGL) insurance is legally required.
The short answer is no, CGL insurance is not legally mandatory for most businesses under federal or provincial law. But that does not mean you can operate without it. In practice, many industries, contracts, and property agreements require CGL coverage as a condition of doing business. More importantly, not having it puts your business at serious financial risk.
When CGL Insurance Is Required
While Canadian law does not demand CGL coverage for all businesses, there are many situations where it becomes a de facto requirement. This usually happens through third-party contracts or industry expectations.
CGL insurance may be required if:
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You lease commercial space. Most landlords require proof of liability coverage before they will finalize a lease.
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You work on job sites. Contractors and trades are often required to provide a certificate of insurance to general contractors, project managers, or municipalities.
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You participate in trade shows, expos, or public events. Event organizers routinely require vendors and exhibitors to carry liability coverage.
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You bid on public or private contracts. Government and corporate procurement often mandates insurance before awarding a contract.
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You operate in a regulated industry. Some sectors, such as construction, health care, or food services, may have specific liability requirements.
Note: If a contract or vendor agreement requests a “certificate of insurance” or “proof of commercial liability,” this typically refers to CGL coverage.
When CGL Insurance Is Optional?
If you are running a very small operation — such as a home-based freelance business with no client visits or physical products — you might not be required to carry CGL. However, this does not mean you are immune from risk.
CGL remains highly recommended even when not contractually required, because it protects you from:
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Customer injuries at your home office or workspace
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Property damage caused while delivering services
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Accidental use of copyrighted content or personal likenesses in advertising
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Legal expenses from unexpected third-party claims
| Scenario | Is CGL Legally Required? | Is CGL Practically Needed? |
|---|---|---|
| Retail store in a leased property | No | Yes — typically required by landlord |
| Consultant working from home | No | Yes — especially if clients visit |
| Independent trades contractor | No | Yes — often required by job sites |
| Vendor at a public festival | No | Yes — required by organizers |
| Government contract bidder | No | Yes — included in bid criteria |
Caution: Just because no one asks for insurance at the start does not mean you are protected. If an incident occurs, the absence of CGL can leave you personally responsible for legal costs and damages.
Why Businesses Carry CGL Even Without a Mandate
CGL coverage is often considered a basic cost of doing business. It protects your assets, supports your credibility, and satisfies the requirements of future clients or partners. It is also relatively affordable compared to the potential costs of a lawsuit or third-party injury claim.
If you are unsure whether your business needs CGL coverage, start by reviewing any lease agreements, vendor contracts, or participation rules for upcoming events. These documents often spell out whether liability insurance is expected.
CGL Isn’t Required by Law, But It Is Required by Reality
In Canada, CGL insurance may not be enforced by statute, but it is often enforced by the practical demands of doing business. From landlords to clients to event organizers, liability protection is expected — and lacking it can hold you back from opportunities or leave you exposed when something goes wrong.