Matt Hands, VP, Insurance and MoneySense
Business interruption insurance, or business income coverage (BIC), is a type of commercial insurance that protects your business against income loss and expenses if you’re unable to continue your regular operations due to a form of insured damage (eg. theft, fire, windstorm).
For instance, if a kitchen fire causes your restaurant to shut down for a few weeks, you would lose out on revenue while bills, such as rent and utilities, will continue piling up. Business interruption insurance, however, can cover all these costs and keep you financially afloat.
NOTE: Business income insurance typically cannot be purchased on its own as a standalone policy. Most insurers will include it under your commercial property insurance or offer it as an add-on to your base policy.
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Consider getting coverage for business disruption if your physical location and its contents are essential to your operations. Without it, one incident could cause your business to shut down, causing you to lose out on potential income and face out-of-pocket expenses.
This includes the following types of businesses:
- Retail shops
- Gyms and recreational centers
Business interruption insurance policies give you coverage when you’re unable to run your business as usual because of damage claims, such as theft, fire, windstorm, lightning, and vandalism.
Depending on your policy, natural disasters (eg. floods, earthquakes) may not have coverage, but you might be able to add them for extra protection. Keep in mind that every insurer has its own list of covered risks, so be sure to speak to your broker for more details.
Insurance for business interruptions can provide compensation for net income loss during the closure period and any ongoing operating expenses. Depending on your policy and coverage limit, some of these expenses could include:
- Utilities (e.g. hydro, electricity)
- Mortgage, rent, or lease payments
- Tax and loan payments
- Cost of moving to a temporary location
- Employee payroll
COVID-19 NOTE: Unfortunately, most policies will not list pandemic, infectious disease, or government-mandated closures as a covered risk under your business interruption insurance. You can, however, speak to your broker about details of your specific policy. Insurance companies adapt to changing situations.
How much does business interruption insurance cost?
Insurance for business delay can cost anywhere between $100 to a few thousand each year, depending on your coverage limit and revenue. Insurance companies may also automatically provide this coverage under your commercial property insurance policy.compare quotes
Type of business
Different industries carry different risks, and if your business is at a high risk of making a claim, your insurance will be more expensive. For instance, if you operate a restaurant, you’re at a higher risk of causing a fire than a company with computers in an office environment. A business that’s costlier to relocate will face higher premiums too.
Number of employees
The more employees you have, the higher your insurance quote will also be – more employees open the door to more inherent problems, especially with new employees who may not have the same experience.
Some locations are more prone to crime (e.g. vandalism) or damaging weather, such as windstorms. If your business resides in one of these areas, expect to pay a higher insurance premium than a business of the same nature in a location with fewer risks.
Your revenue can impact your business interruption insurance quote because insurers will have to provide more in compensation to replace your net income. Therefore, the more you make, the more you’ll pay for insurance as you will also need more coverage if anything happens.
Business insurance history
Having a business insurance history with multiple claims in the past can raise the price of your business interruption insurance. This is because insurers look at your history to predict whether you’ll be making a claim later on. If your retail store has made several claims for theft because you’ keep forgetting to lock up at night, it will likely happen again in the future, costing you more for insurance.
Your business delay coverage should last for the duration of your indemnity period – the time it takes to restore your business. Typically this begins from the day your business operations stop due to the damage until the day all repairs are completed and you’re able to resume operations.
The indemnity period, however, needs to be a reasonable length of time in the eyes of your insurance company. You won’t be able to put off your renovations and take a vacation in the meantime just because your income and expenses are covered by your policy.
Does business interruption insurance cover closure due to COVID-19 (coronavirus)?
Is business interruption insurance included under commercial property insurance?
What is not covered by business interruption insurance?
How do I get business interruption insurance in Canada?
Matt Hands, Business Director of Insurance
With 6+ years of experience at Ratehub.ca, Matt’s focus has been on growing its newest business unit, Insurance. He is a thought leader and a valuable resource to respected publications across Canada. read full bio
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