When fire swept through Jasper last summer, it left behind devastation and heartbreak for the people who live and work there. It also exposed a harsh truth: Many businesses were not fully protected. Consequently, many business owners are realizing not just what they have lost, but that they may not have sufficient insurance to cover their losses.
Jasper’s wildfire and other recent disasters shed light on a growing issue: underinsurance.
In the case of Jasper, many small businesses were not insured to their full replacement value, and many only had 12 months of business interruption coverage. While this may seem adequate when shopping for a policy, the reality is that it often takes two or more years after a catastrophic event before a business can reopen.
The Jasper fire isn’t an outlier. It’s a warning.
The temptation to cut – but at what cost?
It’s no secret that Canadian businesses are under stress. Inflation continues to drive up the cost of goods and services. Labour shortages are straining productivity. Supply chain instability remains a reality. And for businesses engaged in cross-border trade, the evolving U.S. tariffs have added another layer of stress.
Commercial insurance gives businesses the confidence to take risks, pursue new opportunities and grow, knowing they’re protected if something goes wrong. Business insurance is not just a back-end safety net; it enables stability and expansion.
But current economic headwinds have forced many business owners, especially small and medium-sized enterprises, to make tough choices about where to allocate their limited resources. Insurance, unfortunately, may be seen as an area to trim.
Here’s the paradox: The same factors that may be prompting businesses to reduce coverage – economic volatility, inflation and supply delays – are the very reasons why they need more robust coverage.
A risk environment that isn’t letting up
The risk that your business will be hit with a disaster is increasing. Canada is facing a steady rise in the number of extreme weather events, and they’re hitting businesses from coast to coast. In 2024 alone, some of the most severe insured losses were caused by fires in Jasper, hailstorm in Calgary, flooding across southern Ontario and the remnants of Hurricane Debby in Quebec. The insured losses from these events and several others broke all previous records, resulting in $9.2 billion in insured losses (January 2025 estimate was $8.5 billion). The latest figures for the first half of 2025 estimate overall insured losses are already well over $1B.
These aren’t isolated incidents – they’re part of a national pattern of rising risk. As rebuild timelines lengthen due to high construction costs, labour shortages and permit delays, the danger of being underinsured grows.
It’s not just about cost – it’s about time
Much of the public discussion around underinsurance focuses on property valuation: specifically, insuring your building and contents for less than their true replacement cost and exposing yourself to co-insurance penalties (the replacement, rebuilding and repair expenses that the policyholder has to pay out of pocket because they didn't have enough coverage). It’s a serious issue that IBC has addressed in a separate IN Focus article, Are You Properly Insured? What Small Businesses Can Learn from a Tragic Loss.
But there’s another dangerous oversight: underestimating the time required to rebuild and resume operations.
Business interruption insurance provides coverage for the financial losses incurred while the business is being repaired or rebuilt. These costs, including lost income and fixed expenses, such as rent and payroll, continue even when the company isn’t running.
Most standard policies only include 12 months of business interruption coverage. Yet rebuilding a business is often more than a 12-month job. Especially after a large-scale disaster, the process can take 18, 24 or even 36 months, depending on the location, labour availability, permitting timelines and supply chain realities.
And when business interruption coverage ends, so does this financial lifeline. This is the situation now playing out in Jasper.
There are reasons beyond disaster scenarios to ensure that your business is fully and properly insured – reasons related to day-to-day operations. The right insurance can help secure commercial leases, meet client or partner requirements, and signal professionalism and reliability. It protects essential equipment, inventory and vehicles used for business purposes.
However, adequate coverage is about more than safeguarding property; it’s about protecting your ability to function, fulfill obligations and grow.
How to make sure your business is adequately covered
The good news is that Canada’s commercial insurance market is competitive. According to global insurance broker Marsh, commercial rates declined in Canada by an average of 3% in Q1 2025. That makes this a good time to reassess coverage and close any gaps.
Some businesses bought insurance during a hard market, when coverage was more expensive or limited, and they may still be operating with insufficient protection. But with rates softening, now is the time to review your coverage. You may be able to extend or improve your protection – possibly without raising your premium.
Steps every business owner should take
Reconnect with your insurance representative annually: Your operations change; your coverage should too. Make insurance part of your business planning process.
Review your business interruption coverage duration: Many policies default to 12 months of business interruption coverage, but rebuilding can take longer. Ask about 18-, 24- or 36-month options.
Get an updated property valuation: Costs have changed. Ensure your policy reflects the current cost of rebuilding. Ensure it’s not based on outdated figures; update valuation periodically to keep pace with the market.
Understand your co-insurance clause: Many commercial property policies have a co-insurance requirement – typically 90% of the building’s replacement value. If you insure for less than that, your payout may be reduced proportionally. For example, if you’ve only insured the building for half of the replacement value, you may receive only half the cost of repairs, even if the building is not a total loss.
Shop around and compare: Not all policies – or prices – are the same. With increased competition in the business insurance market, better coverage options may be available. Shop around and ask questions.
Build a business continuity plan: Insurance is only one part of risk management. Plan for how your business will respond to disruption.
Use IBC’s Business Insurance Helpline: Call 1-844-2ask-IBC (1-844-227-5422) to speak with an insurance professional who can answer general questions about your commercial insurance coverage and guide you through options and market navigation.
In today’s world, underinsurance is a bigger risk than many business owners realize. It’s not just about the cost of rebuilding, it’s about the time it will take to rebuild.
No one expects a disaster. But when disaster strikes, the time to check your coverage is already behind you.
