Business interruption

Your ability to generate sales could be threatened at any moment. With business interruption coverage, as a business owner you could receive the missing income in the event of a loss.

Prepare for interruptions

All businesses can be disrupted or forced to stop operations as a result of damage caused by a flood, windstorm, earthquake or fire. Business interruption protection is intended to cover business interruption losses resulting from such events.

Named perils or all risk?

Depending on the needs of your business, there are two types of coverage for business losses:

• A “named perils” business interruption policy covers losses caused by the perils specifically listed in your policy.
• An “all risk” policy provides protection against loss caused by any risk that is not specifically excluded from your policy.

Limited or extended indemnity?

The indemnity period is the time period covered for loss of business. There are two basic forms of business interruption indemnities:

1. Limited (or earnings). This policy pays only until the damage is repaired or the property is replaced. As soon as your business resumes, the policy stops paying even if you haven’t regained your previous level of earnings. While a limited form policy is less costly than an extended policy, it may not provide adequate coverage for your business. Consider:
   1. If you are forced out of business for several months, your competitors may snap up some of your customers. As a result, when your business starts up again, you may not be generating the same level of sales as you were before the shutdown.
   2. There may be limits on the amount of time your business is covered and the amount your insurance will pay in any one month.
2. Extended (or profits). This form continues to pay until your business resumes its normal, pre-interruption level. It may be subject to a limited amount and to the maximum period of indemnity listed in your policy.

Additional coverage

It may also be necessary for your business to remain operational during the period affected by damage. You may need additional coverage if you incur extra expenses such as:

• Outsourcing work;
• Temporary electricity or generator, Internet and telephone connections;
• Rentals or the cost of moving to a different premise – if you need to carry on business at another location.

Make decisions before your business is interrupted

The coverage you need depends on the exact nature of your business model:

• Speak to your accountant about the effects of an interruption to your business.
• Discuss coverage options with your insurance representative.
• Be clear about your needs. Ask questions.
• Understand the coverage. Don’t sign anything too quickly.
• Ask around and get opinions from others who operate in the same industry and sector.

Cost control and risk management

There are some ways you can control insurance costs and lower your premium. Ask your insurance representative for more information about the options and other savings opportunities available for your business.

For your business, also look into risk management, a tool that can improve your situation and help you find better insurance coverage.