As a business owner in Canada you find yourself in uncertain and challenging times due to COVID-19. Lockdowns have caused business interruption resulting in lost opportunities and financial losses to you.
In such a situation your business insurance broker is best suited to guide you and to answer your FAQs.
– Will my existing standard business insurance policy or business interruption policy protect me against interruptions caused by COVID-19?
– Typically, business insurance policies and business interruption policies do not cover risks associated with business interruption caused by pandemics like COVID-19.
– Some business owners have bought specialized insurance in light of the WHO declaring COVID-19 as a pandemic. These covers are contingent business interruption cover, stand-alone business interruption cover and supply chain disruption cover.
– Business insurance is complex and mostly customized to your needs. Therefore, you must always consult your business insurance broker, if you have any questions about your coverage.
– What risks does business insurance cover?
– It protects your business property and the physical assets of your business against losses/ damages. There are 2 types of policies:
o Named perils – Provides protection against perils specifically mentioned.
o Comprehensive – Protects against all perils, unless specifically excluded.
– What is meant by Business Interruption (BI) cover?
– A BI cover is an add-on to your existing business insurance policy. In case your business needs to shut down temporarily, a BI cover will protect you from continuing expenses or lost profits. There are 3 types of BI policies:
o Gross earnings policy – You are paid until your property, or damage is replaced, or repaired, or stock gets replaced.
o Profits Form policy – You are paid until your business returns to its normal level (subject to policy limitations)
o Extra expense policy – Applicable to those business owners who are able to operate their businesses during It is designed for businesses that can remain operational during periods of interruption.
– How does a typical BI insurance cover work?
– Typically, BI policies are not uniform across insurers and you will find one to be different from the other. However, most policies contain provisions that indicate that an insurer will cover loss of business income of the insured due to suspension of operations during restoration period.
Notable points here are:
o Evidence of physical damage – There must be proof of physical damage that has caused the business interruption. For instance, evidence of fire, heat, flooding etc. Exceptions are allowed for businesses that have undergone interruption caused due to loss of data, or a loss of utilities.
o Restoration period – Most insurers pay business owners till the time their business is restored, or when the coverage expires.
– Why do insurance companies increase rates during a crisis?
– Insurers had already submitted approved rate changes to their provincial regulators and they had approved these late last year or early this year. In many cases implementation had also begun before emergency was declared.
– However, insurers understand that this is a challenging time for business owners and want to financially help the most affected. They are aware that many drivers are no longer commuting or using their vehicles regularly, and the premiums should be based on the reduced risk.
– In how many days are rates approved?
– As per process a rate change proposal is sent by the insurer to the provincial financial regulator. Only after it is approved, can renewal notices be sent to business owners. The earliest period is 90 days and the latest period is 11 months.
– In what way can business owners lower their premium?
– Business owners should shop around and get more information. Insurers are trying to lower prices for auto insurance as there are fewer people on the roads these days and insurance rates are lower than before.
These valuable answers from a business insurance broker could assist business owners like you during this pandemic.