Business Interruption Insurance in Canada
Also called business income insurance. If a fire or other covered loss forces you to close, business interruption insurance is the policy that replaces the income you lose and helps pay the bills that keep running.
What is business interruption insurance?
Business interruption insurance, also called business income insurance or loss of income insurance, replaces income your business loses and pays for expenses that continue while you can’t operate normally because of a covered loss, such as a fire. It’s usually added to a commercial property policy, not bought on its own.
It doesn’t pay for the damage itself. Repairing or replacing your building, equipment and stock is what commercial property insurance is for. This policy covers what the closure costs you.
Who needs business interruption insurance?
A good test: if you had to close for a month, could you still pay the rent, the loan and your staff? If not, this is worth asking about.
What does a real claim look like?
These examples are illustrative, not real cases. In each one, a covered loss closes the business, and the policy is what helps make up the income and expenses that would otherwise fall to the owner.
When does it pay out, and when doesn’t it?
Most policies pay when a covered loss physically damages insured property and that damage stops you operating. Cause and wording matter. This table gives the general pattern, and your policy decides.
| Situation | Usually pays? | Why |
|---|---|---|
| Fire, storm or other covered damage at your premises | Usually | Physical damage from a covered cause is the usual trigger |
| Damage at a supplier’s or customer’s premises | Depends | Only if you’ve added contingent business interruption cover |
| A power outage | Depends | Depends on the cause and where it happens, and may need a specific extra |
| Access to your premises blocked after damage nearby | Depends | Some policies include civil authority cover for orders that follow nearby damage |
| A pandemic or infectious disease closure | Usually not | Most policies exclude it, and it isn’t physical damage |
| A cyberattack or data breach | Usually not | Usually needs a separate cyber insurance policy |
| Slow sales or a market downturn | Usually not | It isn’t a loss from a covered event |
How long does it pay?
Two time limits shape a claim, and both are worth understanding before you need them.
- Waiting period (time deductible): the time after a loss before payments begin. Income lost during it is yours to absorb.
- Indemnity period: the longest the policy will pay after a loss. How it ends differs by policy form. Some stop once the property is repaired or replaced, while others continue until the business is back to normal, up to a set limit.
A short period can run out before you’ve recovered. Rebuilding a property, replacing specialized equipment, getting permits or winning customers back can all take longer than owners expect. Ask your insurer how each period is set, and what happens if repairs take longer than planned.
How much business interruption insurance do you need?
There’s no single formula, and the right amount depends on your business. This is a way to think it through, not a recommended limit.
- Estimate the income you’d lose. Take your usual revenue for a period and subtract the costs that would stop if you were closed.
- Add the costs that continue. Rent or mortgage payments, loan payments, taxes, utilities and insurance.
- Add the payroll you’d keep paying. Include staff you’d want to keep so you can reopen with your team.
- Add the extra costs of getting going again. A temporary location, moving costs or faster shipping.
- Decide how long it could take. Think about repairs, permits, replacing equipment and winning customers back.
Ask your broker or insurer for their business interruption worksheet, and check your figures with your accountant.
What can be added?
The base cover may not include everything you’d need. These are common extras. Availability and wording vary by insurer, so ask about each one.
| Extra | What it typically does |
|---|---|
| Extra expense | Pays the additional costs of operating while you recover, such as a temporary location |
| Contingent business interruption | Covers lost income when a supplier, customer or partner is shut down by a covered loss |
| Civil authority | Covers lost income when an authority blocks access to your premises after nearby damage |
| Rental income | Covers rent you lose from tenants if you’re a landlord and a covered loss makes a unit unusable |
| Utility services | Covers lost income after an interruption to power, water or communications off your premises |
| Longer indemnity period | Extends how long the policy pays, for businesses that would take longer to recover |
How much does business interruption insurance cost?
There isn’t one price. What you pay depends on your business and the cover you choose. The only reliable number is a quote for your own business, and Clearly Rate doesn’t set prices. The insurer does.
What affects the price
- The value of your commercial property policy
- Your industry and how risky it is
- Your annual revenue
- Where the business is located
- The limit you choose, and how long the policy would pay
- The waiting period
- The number of employees
- Your claims history
How to keep your premium down
Base the limit on your own figures rather than a guess, since over-insuring costs more and under-insuring can leave a gap. Ask what a longer waiting period would save, and whether you could cover that stretch yourself. Ask about discounts for alarms, sprinklers and other protection, and keep your records in order, since well-documented income makes both a quote and a claim easier.
Is business interruption insurance required?
No general law requires it, but a lender or landlord may ask for it in some cases.
| Situation | What’s usually required |
|---|---|
| You have a mortgage or loan on the property | The lender typically requires property cover and may ask about income cover, so check your loan terms |
| You rent commercial space | Your lease may set insurance requirements, so read yours |
| You’d struggle to cover fixed costs during a closure | Not a requirement, but a practical reason to ask about it |
Get ready: records to keep
Cover is only as good as your ability to show what you would have earned. Keep these in order before you need them.
- Financial statements and tax filings for recent years
- Sales records and invoices, including cash sales you can document
- Payroll records
- Supplier invoices and key contracts
- A list of your ongoing fixed costs
- A copy of these kept somewhere other than your business premises
What business interruption insurance doesn’t cover
It responds to income lost because a covered loss stops you operating. It generally won’t cover:
- Closures caused by a pandemic or infectious disease, or by a government order that isn’t linked to physical damage, which most policies exclude
- Income you can’t document, such as cash sales with no records
- Flood, earthquake and sewer back-up, unless you’ve added them to the underlying policy
- Strikes, contract terminations or penalties
- A supplier’s insolvency
- The illness of the owner
- Slow sales or a market downturn
- The physical damage itself, which is a claim under commercial property insurance
- Data breaches, which usually need a separate cyber insurance policy
- Claims by others that you caused them harm, which fall under general liability insurance
Exclusions vary by insurer, so read the list before you buy.
Business insurance FAQs
Is business interruption insurance included in commercial property insurance?
Does it cover rent and payroll?
Does it cover a pandemic or a government-ordered closure?
What is a waiting period?
What is contingent business interruption insurance?
Does it cover a power outage?
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