What Is Business Interruption Insurance?

When things go awry, and your small business’s ability to generate sales is threatened by an unexpected event, can you weather the storm?

For example, wildfires have raged across parts of Western Canada and Atlantic Canada in recent weeks, prompting residents and small business owners in affected communities to make hasty evacuations. For business owners, that may mean temporarily ceasing operations and hoping when they return, their properties aren’t severely damaged (commercial property insurance can help cover losses if a company’s property and inventory are damaged by fire).

That brings the need for emergency preparedness to the fore. Interestingly, a 2021 survey of Canadian businesses on emergency preparedness found four out of five companies have had their operations interrupted over the previous five years. Among the causes, those businesses shut down at one time or another:

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• 45% closed temporarily because of communication outages
• 43% due to winter storms
• 23% because of a flood
• 12% due to fires (8% wildfires and 4% structural fires)

Only 37% of businesses surveyed say they’re fully prepared to deal with an emergency or disaster.

One critical preparation component to ensuring business continuity in such a circumstance is having business interruption insurance as part of your overall policy.

What Is Business Interruption Insurance and What Does It Provide?

Business interruption insurance can be the lifeline to cover losses resulting from an insurable event, such as a fire, water damage, theft, vandalism, or a natural disaster. 

If you submit a claim for business interruption and your insurer accepts it, you can expect a typical policy to cover a broad range of your operating expenses, including:

• Lost income and your overhead costs, like monthly rent payments for your commercial property
• Temporary relocation costs
• Employee payroll costs
• Taxes and loan repayments

Have a Business Continuity Plan

It is worthwhile to take the time to think about emergency preparedness and business continuity. Consider things that could shutter your small business, be it a fire, flood, or other mishaps, and have a plan to address each risk. 

Of course, there is no one-size-fits-all approach to emergency preparedness, but here are a few things to consider:

Your suppliers and business partners

Discuss with your suppliers and partners how they can continue to provide you with the products and services your small business relies on to stay open. What are their backup plans? How can you work together to ensure the wheels keep turning in the face of an unexpected event?

Your mission-critical data

Protecting your company’s and customers’ data is essential. Disaster or not, you should keep copies of your data stored at a secure, remote location, in the cloud, or on a server elsewhere.

Communications

If the communication channels you usually use are affected, how will you communicate with your employees, partners, and customers? For example, keep track of employee and business partner phone numbers and email addresses and tell them how to reach you during an emergency. Likewise, know how you will contact your customers and keep them informed.

A physical backup location

If the commercial space you usually use is not available suddenly, it’s wise to have another location you can move to, if need be, to remain operational.

A survival kit

Whether you purchase a pre-assembled survival kit or put one together yourself, it’s a must-have. Ensure all your employees know where it is and how to use it. The Canadian Red Cross recommends your survival kit includes several items, such as:

• Fresh water (four litres per person per day)
• A three-day supply of non-perishable food and a can opener
• A flashlight and extra batteries
• Warm blankets
• A first-aid kit
• Paper maps of your region
• Personal hygiene items, including toilet paper and hand sanitizer
• A working cell phone and spare battery pack
• A multi-purpose tool or several tools such as a hammer, screwdriver, and wrench
• Critical documents, including your business insurance policy

A recovery plan

What vital aspects do you need to keep your small business running following a disaster or unexpected event? How will you recover from it quickly? Determine the roles your employees will play in any possible scenario. What actions do you need to take, and at what estimated cost? For instance, if your e-commerce website or platform goes down, how long will it take to get it back online and at what cost?

Having cash on hand

If an extreme event like a natural disaster hits your city or province, accessing your bank account may not be possible. Having a few days worth of cash in a secure location such as a safe is worthwhile.

Review your business insurance

When was the last time you reviewed your business insurance policy to ensure it is up-to-date and that you have adequate coverage? Review it, and speak to a Zensurance licensed broker if you have questions or need help understanding your policy.

4 Ways to Keep Your Business Going If You Must Close Temporarily

For small business owners, here are four tips for keeping your business running if you’re forced to close your physical location temporarily:

1. Get active online

You can still conduct business online if you need to close your physical location while repairs are underway following an insurable loss. Doing so requires shoring up your cybersecurity defences and ensuring cyber liability coverage is part of your overall policy to protect your company.

2. Communicate with employees, customers, and partners

Inform your employees, customers, and business partners about the temporary closure and provide them with regular updates. Utilize your website, social media channels, email newsletters, and any other means of communication to keep them informed. Assure them of your commitment to them and provide alternative ways to access your products or services.

3. Document everything

Take detailed notes, photos, and videos of the damage to your store, warehouse, or office, and document the repair work undertaken while the property is closed. Doing so is necessary when filing an insurance claim and providing your broker with updates on the cost and progress of repairs.

4. Collaborate with other small businesses

Explore partnerships or collaborations with complementary businesses in your community. For example, if you run a restaurant, consider teaming up with a catering company to offer delivery services or utilizing a local grocery store to sell your products. You can leverage each other’s resources and customer bases by working together.

An unexpected event affecting your regular operations can happen anytime and anywhere. Think through the types of risks your small business faces, ensure you have business interruption coverage as part of your policy, and talk to a Zensurance broker to see if there are gaps in your coverage or if you need to increase your coverage limits.