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How Does Business Interruption Insurance Work?

Like most business owners, you may be asking “What is business interruption insurance?”

Would your Ontario business be prepared and covered if the unimaginable happens? Are your potential earnings and profits fully covered in a situation where your building burns down, you lose a key supplier, or a major piece of equipment breaks down?

In this article, our Huronia Insurance brokers will explain what is business interruption insurance in Ontario and how it can protect your business beyond basic commercial and property insurance. We’ll also look at the types of coverage you should consider.

Protect the Earning Power of Your Business

Business interruption insurance coverage protects against the loss of income that a business may suffer following a disruption. It is essentially insurance to protect the earning power of your business. It will cover things like lost income, ongoing expenses, and any potential recovery costs.

Other names for this type of insurance coverage may include:

  • Business Income Insurance
  • Earnings Insurance
  • Earnings Coverage
  • Profits Insurance

These types of insurance policies are not typically sold as a stand-alone insurance coverage. Rather, it is either included or an add-on to a commercial property insurance policy.

Business Interruption Insurance Examples

Scenario 1: A Fire Destroys Your Office

Your property insurance policy will likely cover the costs to repair the building and replace equipment, but what about loss of earnings while your office is closed for repairs due to fire?

Scenario 2: Your Vehicle Lift Breaks Down

Again, property insurance will likely cover the costs to replace an expensive piece of machinery but what about the loss of work and income you will incur because you do not have access to this equipment?

Additional insurance examples may include denial of access to your building due to a neighbouring business disaster or:

Flood Damage                         Extended Power Outages

Natural Disasters                    Interruption of a Key Supplier

Business Interruption vs Property Insurance

Standard commercial property insurance will cover the costs to replace or rebuild a damaged property but does not cover the loss of any income due to being closed during the replacement or rebuilding period. This is where a interruption insurance would come into play.

Types of Business Interruption Insurance Coverage

You may be wondering if business interruption insurance covers payroll? Basic coverage is designed to protect against the losses that will occur when closed, which can include:

  • Loss of Income
  • Reduced Earning Capacity (While Operating Expenses Continue to Occur)
  • Loss of Rents
  • Loss of Interest
  • Loss of Attraction
  • Loss of Key Employees
  • Relocation or Recovery Expenses
  • Additional Operating Costs During Recovery
  • Contingent Losses or Expenses Due to Damage by Key Suppliers
  • Fixed Costs (like payroll)
  • Extra Expenses

Prevention Tips

There are several ways that our business insurance brokers can help you protect yourself against business interruption, for instance:

  • Create a contingency plan of how you could proceed with “business as usual” in a case where your property experiences a loss or disaster. This can include planning on how to continue serving your customers and having access to temporary premises if needed.
  • Keep a list of secondary suppliers you can turn to in the case of your primary supplier suffering a loss or not being able to provide materials.
  • Maintain a safe and hazard-free environment to reduce the risk of disasters such as fire and flood.
  • Always keep a copy of all your business records and store these off-site in the event that your primary place of business is damaged.

Explore Your Business Interruption Insurance Options

If you still have questions about what is business interruption insurance and what it covers, or for more information on how you can protect yourself against unforeseen circumstances, please contact Huronia Insurance Group.

We can also help you understand various aspects of coverage including insurance limits, deductibles, and exclusions.

Our business insurance brokers bring over 200 years of combined experience. Let us help you understand your current business insurance policy to determine if it contains sufficient coverage and income protection.

Call Toll Free 1-866-955-8386

Request an online Business Interruption Insurance Quote