Business income insurance, also known as business interruption insurance, is a type of coverage that replaces lost business revenue due to a covered loss, or “peril.” The cause of the loss must be covered by your commercial property insurance, since these policies are either added to property coverage or included in a business owners policy.

For example, if a fire or windstorm destroyed your place of business and you had to close for an extended period, a business income policy would help cover payroll, rent, utilities and taxes. Most policies also help pay for relocation, and there are other features you can add as discussed below.

Because a disaster can shutter your business indefinitely, business income insurance is an important coverage.

Be mindful of policy exclusions

Business income insurance won’t cover all causes of a shutdown. When considering a business income policy, take the time to understand what it covers and what it doesn’t. In general:

• Coverage is tied to your underlying property policy. If a peril is excluded from your property insurance, it’s excluded from your business income policy, too. For example, property insurance doesn’t cover floods, earthquakes or mudslides, so your business income policy wouldn’t cover lost income from these events. However, you may be able to purchase additional coverage for these types of perils.
• Business income losses are almost always caused by physical damage to property. Pandemics, viruses and communicable diseases (such as SARS and COVID-19) are typically excluded from coverage. Even all-risk policies usually list pandemics as an exclusion.
• Shutdowns mandated by civil authorities that directly causes business losses are usually covered, even if there is no physical damage to your property. Still, coverage is limited to the perils listed in your property coverage, and some policies require a direct physical loss. For example, if local authorities required your business to close due to its proximity to a fire, you may be able to make a claim. Coverage is usually limited to two weeks of interruption.
• Broken items aren’t covered, nor are utility disruptions. However, you can purchase utility service interruption coverage as part of your commercial property insurance. Utility service interruption policies kick in when water, gas, electricity or other services are suspended. A “time-element” policy covers loss of service within a specified period. “Direct-damage” insurance extends the coverage in your property policy to include damages resulting from downed power lines, broken water mains or other utility disruptions.
• Some types of operating expenses, such as marketing and research and development costs, don’t qualify for replacement.

Types of expenses that are covered

Business income insurance helps you pay your expenses so you can keep your business afloat. To successfully make a claim, you’ll need accurate records of your income and expenses. Income that’s not listed in your financial documents won’t be covered. Generally, a business income policy covers:

• Employees’ wages, salaries and commissions
• Taxes
• Loan payments
• Fixed costs such as rent, operating expenses and other costs you incur to generate business
• Profits that would have been earned had you remained open
• Replacement of equipment and associated training costs
• The cost of moving to a temporary location

How long will you be covered?

Policies have a specified “restoration period,” which is the number of days they will cover lost income while a business recovers. These periods are generally 30 days, but it’s possible to purchase extended coverage of up to 360 days. An extension will help your business if it takes longer than anticipated to resume full operations and return to profitability. There is usually a waiting period of two or three days before the restoration period starts.

Understand that payments cease once you resume operations, even if you’re working out of a temporary location and your main location hasn’t been restored. Ask your insurance broker about appropriate limits and the amount of time you may need to recover.

Remember, your property insurance pays the cost of repairing physical damage to your property, while business income insurance replaces lost income while your business is shut.

Extra expenses to consider

You may want to add extra expense coverage to pay for items not normally included in a business income policy. Some examples include:

• Leasing equipment you may need
• Paying employees overtime or hiring extra employees
• Replacing items such as furniture and computers
• Renting a temporary location while your property is being worked on

What if a supplier or vendor is disrupted?

You can also purchase “contingent business interruption” coverage. This kicks in when a supplier or vendor you rely on closes and it disrupts your business, or if a primary buyer, store or venue closes and you can’t sell your products. Payouts are generally limited to losses covered by your property insurance, and there may be a physical damage requirement.

Don’t skimp on business interruption coverage

Whether you add business income to your commercial property insurance or purchase it as part of a package, talk to an insurance broker about what it covers, what it excludes and whether you need to purchase any add-ons.

You’ll also want to analyze your sources of income and the costs you incur to generate that income. You’ll need to have accurate financial records to make a valid claim. If you fail to document a source of income, you won’t be able to include it in your claim.

You should also draw up a disaster response and business continuity plan so you’re prepared for a business interruption and can recover quickly. Planning and proper insurance are the keys to surviving a disaster.

A standard homeowners policy won’t cover a dwelling that is vacant or unoccupied for an extended period. It’s normally specified in your policy details. If you leave your home unattended for 60 days (30 days in certain policies) and something happens, your claim may be denied.

That’s why you need to look into vacant home insurance if you’re planning to travel for an extended period or are in the process of selling or renting your house.

The difference between vacant and unoccupied

There is a big difference between a vacant home and an unoccupied one. A home is considered vacant when it is empty, while an unoccupied home is one that is just missing its occupants. The distinction is an important one if you are temporarily away from your home because it means you are (or should be) covered by your policy.

For the distinction of unoccupied to hold, none of the major pieces of furniture or appliances should be missing; it must be a livable space. We can help you add an endorsement to your policy just to be safe.

Construction versus renovations

Strangely enough, policies do not consider homes under construction to be vacant. You don’t need a special endorsement or policy to ensure coverage while your home is being built; a standard homeowners policy will do.

However, major renovations are different because rooms are emptied and the inhabitants are away. As discussed earlier, this constitutes a vacancy.

Who needs vacant home insurance?

Talk to us about vacant home insurance if:

• You’re buying, selling or renting your dwelling.
• You plan to be away from your home for more than 30 days.
• You’re moving out temporarily for major renovations.
• You own a vacation home.

You can cover a vacant home on your existing policy by adding an endorsement or purchasing a stand-alone policy. Since the risk of a fire or break-in is greater than in a regular home, you can expect to pay more for this policy.

What is covered under vacant home insurance

Most vacant home policies cover:

• Named perils, like fires, lightning, wind, hail and explosions
• Glass breakage, vandalism and malicious mischief
• Liability

Theft of personal property on the premises may not be covered, and water damage is often excluded.

There are different levels of coverage, so be specific about your needs before settling on a policy. Contact us to get more information about this coverage or to review your current coverage.

Flooding is one of the most common and costly natural disasters in Canada. It also isn’t typically covered by homeowners insurance.

Overland flooding coverage has only been available to Canadians since 2015. According to the catastrophe insurance data firm CatIQ, 55% of Canadian homes have flood insurance. That leaves nearly half the country without coverage.

To protect your primary or vacation home, you need flood insurance. It can cover structures, windows, fuel tanks and contents, such as personal possessions, small appliances and artwork, depending on your policy.

Flood insurance is usually required for homeowners taking out mortgages for properties in high-risk flood zones. But homeowners in lower-risk areas may want to get it, too, because flooding can happen anywhere in the country.

Flood insurance policies

Insurance companies provide homeowners and tenants with overland (freshwater) flooding coverage. You can also get flood insurance for seasonal and secondary homes. Coverage can be expensive or hard to obtain in high-risk areas, but you can mitigate your costs by choosing a higher deductible.

Flood insurance generally excludes saltwater floods, tsunamis, dam breaks, intentional acts and some high-risk areas. Flood coverage is sometimes bundled with sewer backup insurance.

Advantages of flood insurance

Consider the following reasons to get flood insurance for your property:

• You can set your coverage limit to the value of your property to avoid any coverage gaps.
• If you have furs, jewellery, fine art or collectibles that could be damaged by floodwaters, you can insure them separately for the appropriate amount. Ask us for details.
• Flood insurance can be cheap in low-risk areas.
• Flood insurance can offer multiple deductible options.
• Flood insurance can pay for living expenses if your home becomes uninhabitable. The extent of coverage is typical of regular home insurance policies.

In this fast-changing environment, now is the time to talk to us about the latest options available to protect your home from floods. Don’t wait until floodwaters rise to understand your flood coverage options.

If you lost all of your personal belongings in a fire or another catastrophe, you likely wouldn’t be able to recall all of them from memory. You can test that assumption by closing your eyes right now and listing all your valuable belongings in each room of your house. Even if you manage to get 80% right, you left 20% out, and you haven’t answered an even bigger question: What is it all worth?

Replacement cost is a blessing

Unless you have the most basic coverage through your homeowners policy, you should have replacement cost for personal property. Not sure? Read your policy to confirm.

Replacement cost is an insurance term that guarantees your property will be replaced by something brand-new of equivalent quality and value. Old computer? New computer. Old fridge? New fridge. No depreciation is calculated on what you own, because if you lost it all, you probably couldn’t afford to replace it all. That would go against the very principle of insurance, which is to set you right after a catastrophic loss.

The impact of home insurance fraud

Home insurance fraud is a fact. So many people have used and abused the “My Roku 50-inch TV has been stolen” line that insurers proceed with the utmost caution when dealing with these kinds of claims. You won’t run into the same problem if your home is destroyed in a fire, but then who’s to say you had a 50-inch Roku TV if you can’t prove it?

You want to document everything of value with photos, along with a record indicating:

• What the item is
• Identification (serial) numbers
• The price paid
• The date of purchase
• A copy of the receipt

With all this in hand, your claim will be settled in record time. Don’t leave this information in your home. Instead, store it securely in another location.

A picture tells a thousand words

Pictures are factual, and they can help you organize your inventory. Work systematically, from room to room, taking a 360-degree picture of the room with the major furniture and appliances in place.

Collections

Silverware, baseball cards, coins or other paraphernalia, you’ll need to document them extensively. You can purchase riders specifically to cover your collectibles. We can review your inventory to ensure you are adequately covered for their entire value.

There are limits to other items in your home that you might not be aware of. Read your policy to understand what those limits are. They include computers, antiques, furs, jewellery, sports equipment and more.

Remember to time stamp your photos

The adjuster knows when you did your inventory, and store the pictures in a safe place.

Take the guesswork out of your claim.

You’ll have more than enough to deal with if you experience a major loss, so it pays to be prepared.