Business interruption insurance is one of the coverages that we offer as part of our small business insurance solution, but like technology errors & omissions coverage or cyber insurance coverage, it can be difficult to truly understand the unique value that this sort of protection provides. The devastating wildfires that tore through Fort McMurray, Alberta and forced an evacuation of the community showcases the real value of insurance. The Insurance Bureau of Canada estimates this disaster to be the most expensive in Canadian history with a total cost of over $3.5 billion!
Business interruption insurance defined
Business interruption insurance offers coverage that will replace your lost income and cover expenses if your business can’t maintain normal operations due to an insured loss. For example, if your business is forced to temporarily close due to flood damage, this coverage will help replace your lost income while it’s closed. If you’re able to temporarily relocate your business, the coverage will pay for those extra expenses.
Business interruption insurance without a loss
Most of the $3.5 billion in claims will be paid out to personal property, auto and commercial insurance policyholders who have experienced losses. These losses will be related to vehicles, homes and property destroyed by the fire or damaged by the smoke. This is an example of when insurance coverage is more straightforward and the value of it is easy to understand.
Business interruption insurance is different than most other types of insurance because it doesn’t necessarily involve a physical loss. While most insurance is concerned with rebuilding or replacing something that has been damaged or destroyed, business interruption might not involve any direct damage at all. The mandatory evacuation of Fort McMurray is a real example of how business interruption insurance can be invaluable when the unexpected happens and you’re forced to shut down your business for reasons completely out of your control.
Since the evacuation involved nearly 90,000 residents and lasted over a month in some badly affected areas, most businesses were unable to operate during that time. That means there was no business income for at least a month, though probably longer given the circumstances. While a business is closed, the bills are still piling up: pay for employees, invoices from suppliers, bills for utilities, rent/lease payments and of course taxes are just a few common expenses. Any business would have a difficult time dealing with an extended period of no income. Small businesses would have an even more difficult time.
This is where business interruption coverage can help save your small business. If your business is covered for fire and evacuation, your insurance will cover the lost income while you’re unable to operate. This type of insurance can help your business continue to take care of employees, pay your bills and get you back up and running as soon as possible.
The Fort McMurray wildfire is a reminder that there are always risks to your business that are beyond your control. A comprehensive business insurance solution with the right coverages can help keep your business protected when these types of disasters strike.
This blog is provided for information only and is not a substitute for professional advice. We make no representations or warranties regarding the accuracy or completeness of the information and will not be responsible for any loss arising out of reliance on the information.
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