Everything you need to know about business interruption insurance

Canada saw a 406% increase in claims in 2024 due to severe major weather events and natural disasters in just 4 weeks. During a period with a rising instance of natural catastrophes, the need to reassess insurance needs is growing–and business owners are not exempt from this push.

Some companies may consider reducing or even removing their insurance coverage as a way to save money. But this could lead to significant problems. Not having adequate insurance leaves your business massively exposed and even if you could afford repairs after a storm or similar loss, could you keep up with ongoing expenses during a period of unexpected downtime?

Enter one of the most crucial commercial insurance coverages there is for any company: business interruption insurance.

Business interruption insurance may cover a variety of costs associated with an unexpected downtime. If your business needs repairs because of a fire that was covered by your insurance policy, your business interruption may cover: 

Every business interruption policy is different, so be mindful that what’s listed above may not necessarily be included in your coverage. Review your plan or ask an insurance broker to go over your policy with you. 

When buying business interruption insurance, we recommend working closely with a broker to identify the best coverage for your operations. There are several types of business interruption: 

This form of business interruption insurance covers all actual costs and expenses as a result of a claim due to physical damages, destruction to insured property, etc. The payment is based on what the company would have earned were it not for the unexpected loss. 

This type of business interruption insurance pays lost profits until your business returns to its full functionality after an interruption (or up until your policy’s limits). 

This covers your gross earnings until the property that was damaged in an insured loss is up and running again.  

Extra expenses business interruption insurance offers the funds needed to relocate, if necessary, to temporary facilities until your insured property can be fully restored.  

Business interruption insurance, like any other commercial insurance policy, is not a catch-all solution and must be purchased alongside other coverages to be fully sufficient in protecting your company. It also cannot be purchased on its own and must be bought alongside commercial property insurance.  

Most of the time, the following events will not be covered by business interruption insurance: 

Also keep in mind that all policies have limits. Your insurer is only required to pay if your business legitimately sustained a loss due to the interruption, and the amount you’ll be eligible to recoup cannot exceed the limit that is stated in your policy. The limit could be a specific duration of time or a dollar amount.  

And although unfortunate, business interruption insurance does not cover COVID-19-related losses. This is because viruses cannot cause physical damage to property. Business interruption insurance is triggered by a physical loss covered by commercial property insurance, not because your staff are sick or closures due to a virus. Since the COVID-19 pandemic, most business interruption policies contain clauses specifically excluding pandemics or viruses from coverage.  

Business insurance plans vary in cost depending on a number of factors, including the following: 

Business interruption insurance policies vary from a few hundred to several thousand dollars per year. That said, they can save your company thousands of dollars if an interruption does occur. Plus, you have peace-of-mind knowing your business is protected. 

Give us a call at Mitch Insurance to discuss business interruption insurance today. Our commercial insurance brokers would be more than happy to give you a proper run through of how it works, the benefits it provides your business, and more.