In today’s volatile environment, businesses face mounting risks from geopolitical tensions, trade and supply chain disruptions, rapid technological change, and increasingly severe weather. These pressures can interrupt critical operations and threaten financial stability. As a result, having a strong business continuity plan (BCP) is more important than ever.
A business continuity plan outlines how an organization will maintain essential operations during unexpected disruptions by identifying key risks and safeguarding critical functions. This proactive approach strengthens resilience, minimizes downtime, and supports faster recovery. Business continuity planning is often paired with insurance coverage to ensure businesses are financially prepared when disruptions occur.
Protecting against underinsurance
When a business is not adequately insured, a single event can jeopardize its survival. Underinsurance has been described as a “silent killer,” particularly in an uncertain economic climate. For example, with a volatile tariff environment and the Canada‒U.S.‒Mexico Agreement up for renegotiation, a company importing U.S. goods may require significantly higher coverage to account for increased tariffs. Insurance limits that once seemed sufficient may no longer reflect today’s exposure.
A 2025 TD Insurance study found that while nearly 94% of small business owners carry insurance, only 52% would use it in an emergency. Many SMEs hesitate to file claims out of concern that doing so will increase premiums at renewal. Canadian Federation of Independent Businesses research supports this finding, with 82% of businesses citing higher premiums as the main reason for avoiding claims related to community safety issues.
Avoiding insurance claims, however, can be a risky strategy. Relying on lines of credit, or loans to finance emergency expenses can weaken a company’s financial position and increase long-term vulnerability. Underinsurance can also trigger co-insurance clauses, meaning a business may not receive full compensation for the property’s replacement cost value
Adequate insurance coverage helps businesses better manage liquidity shocks and financial losses after a disaster. To avoid being underinsured, businesses should:
Understand their current coverage, including what is and is not insured.
Review policies regularly, especially when operations expand, change location, or face new risks.
Share updates with their insurance representative so coverage aligns with current operations and exposure.
Seek general information from trusted resources , such as IBC’s Business Information Centre.
Climate-proof your business
With the growing frequency and severity of extreme weather events in Canada, business continuity planning is becoming increasingly critical. A recent Swiss Re report estimates that global economic losses from natural catastrophes reached approximately US$107 billion (about C$150 billion) in 2025.
In Canada, insured losses from natural catastrophes in 2025 are estimated at $2.4 billion. This follows a record-breaking year in 2024, when severe weather losses reached $9.4 billion—the highest on record. Over the past decade, more than 87,000 Canadian businesses have experienced financial losses due to severe weather and natural disasters.
Beyond traditional continuity planning, business owners should assess how to climate-proof their organizations. One option is parametric insurance, which can complement standard policies. Unlike traditional insurance, parametric coverage triggers a payout when a predefined threshold—such as wind speed or rainfall—is reached, rather than after a damage assessment. This approach can provide faster access to funds and is especially useful for weather-dependent industries such as agriculture and construction.
Accurate replacement cost (RC) appraisals are also critical to avoiding underinsurance. An RC appraisal considers factors such as material and labour costs, debris removal, building code upgrades, and heritage requirements. Conducted by a professional appraiser, this snapshot-in-time assessment reflects today’s rebuilding costs and helps ensure insurance limits remain aligned with real-world expenses.
The role of business interruption insurance
Business interruption insurance is a vital tool for organizations affected by insured losses, including those caused by extreme weather. This coverage may indemnify a business for its reduction in earnings during a temporary shutdown and can also cover ongoing expenses.
For example, if an auto repair shop closes due to a fire, business interruption insurance can compensate for the revenue that would have been generated during the closure period.
Business interruption insurance is typically an optional add-on to commercial property insurance and is available in several forms:
Gross earnings policies, which cover the reduction in gross earnings (revenue less non-continuing expenses) during the period of restoration
Profits form policies, which continue payment until the business returns to pre-loss operating levels.
Extra expense policies, which cover additional costs incurred to continue operations, such as relocating temporarily.
An important consideration is the time required to rebuild or repair damaged property. Industry timelines for total loss claims often range from 20 to 36 months, underscoring the need for sufficient coverage limits and realistic recovery planning.
Canada’s small business sector plays an integral role in the economy, and owners should feel comfortable pursuing innovation and growth knowing they are supported by the right insurance products.
This article was written with support from the Canadian Federation of Independent Business
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