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

A 2021 survey of Canadian businesses on the topic of emergency preparedness found four out of five companies have had their operations interrupted over the past five years. Among the causes those businesses shut down at one time or other:

  • The COVID-19 pandemic is the no. 1 reason (77%)
  • 45% closed temporarily because of communication outages
  • 43% due to winter storms
  • 23% because of a flood

Interestingly, only 37% of businesses surveyed say they’re fully prepared to deal with an emergency or disaster. When asked what possible future disasters they are concerned about that may affect their operations, the top three risks respondents identified are pandemics (75%), communication outages (72%), and winter storms (56%).

business interruption

You might think business interruption insurance would make the difference because of the impact COVID-19 is having. But it does not include coverage for pandemics, epidemics, or government-mandated closures to businesses due to an infectious disease. It also does not provide coverage for closures due to a terrorist attack, earthquakes, floods, or pollution-related damages. 

However, business interruption insurance can be the lifeline you need to cover your losses resulting from an insurable event, such as a fire, theft, or windstorms. 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 space
  • Temporary relocation costs
  • Employee payroll costs
  • Taxes and loan repayments

Why Business Interruption Insurance Doesn’t Cover Losses Due to COVID-19

Pandemic coverage may have been available before COVID-19 by some insurance companies, but typically, it wasn’t an affordable option for small businesses. Now, coverage for COVID-19 is not available as the virus and its variants are considered a known risk, and insurers treat it as they would to insuring a house that is already on fire.

Nevertheless, it is worthwhile to take the time to think about emergency preparedness and business continuity. Make time to consider things that could cripple your small business, be it a fire, flood, or other mishaps, and have a plan in place to address each risk. Of course, there is no one-size-fits-all approach to emergency preparedness, but here are a few things to ponder:

  • 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 be keeping copies of your data stored at a secure, remote location or on a server that’s located 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 if they must. 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 extra 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 for 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 you 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. It’s worthwhile to have a few days’ worth of cash stashed in a secure location such as a safe.

Four Tips for Keeping Your Small Business Running During the Pandemic

Different provinces are enacting different measures as we continue to endure the pandemic and all the challenges it entails. For small business owners, here are four tips for keeping your company up and running whether in lockdown mode or not:

  1. Think about cyber liability protection. Many businesses affected by the ups and downs of pandemic lockdowns have moved their operations online, which might include allowing their employees to work remotely. For those types of small businesses that can operate digitally to keep the lights on, it’s a wise move, but it, too, comes with risks, namely cybersecurity risks. Make sure you have cyber liability coverage as part of your overall policy.
  2. Tap into emergency government funding. You may be eligible for financial support from the federal government and receive funding whether you are self-employed or run a small business. Likewise, find out what financial aid options your provincial government has available. For instance, in Ontario, small business owners who are subject to closing can apply to the Ontario COVID-19 Small Business Relief Grant.
  3. Collaborate and partner with other local businesses. Speak to other small businesses in your community or your local business improvement association and find ways to support each other. For example, provide your customers with a coupon that offers a discount at another local business and vice-versa to help drive sales. Or work together to launch a “buy local” program in your community.
  4. Up your digital marketing efforts. If you aren’t already, offer your customers and prospective customers blogs and e-newsletters sharing your knowledge and highlighting sales of goods or services you’re offering. Grow your audience using social media channels like Facebook, Instagram, and Twitter.

An unexpected event that affects your regular operations can happen at 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 licensed broker to see if there are gaps in your coverage or if you need to increase your coverage limits.

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