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The fire is insured. Business interruption insures the year after it.
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Business interruption insurance replaces the income a business loses, and pays the expenses that keep running, when insured physical damage forces it to close or slow down. It is usually added to a commercial property policy and responds only after a covered loss such as a fire, windstorm or water escape. It covers lost gross profit or gross earnings, continuing costs like rent and payroll, and the extra expense of staying open, for a set indemnity period.
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Property insurance rebuilds the premises. Business interruption rebuilds the revenue. It replaces lost gross profit and pays continuing expenses such as rent, payroll and loan payments while insured damage keeps you closed or slowed, and it is usually written alongside your commercial property cover.
Most BI claims that disappoint don't fail for lack of coverage. They fail on an indemnity period that ran out before sales recovered, a sum insured that triggered the average clause, or a missing extension for a supplier or utility. We size it from your financial statements and a realistic rebuild timeline, and coordinate it with equipment breakdown and contents cover so the triggers line up.
A fire damages the building. Business interruption, often called BI or business income cover, deals with everything that happens to the books afterwards. It is written as part of a commercial property policy and pays out only when insured physical damage interrupts the business.
What it does not do: it doesn't respond to a slow season, a lost contract, a market downturn or a supplier price increase. It doesn't respond to a closure that involves no physical loss or damage, which is why pandemic claims failed. And it doesn't repair the property itself; that is the job of the property and business contents limits sitting beside it.
Any business whose revenue depends on a physical location or physical equipment, and whose fixed costs would outrun its cash reserves during a rebuild. In practice:
Our plain-language explainer, the coverage that saves the year after the fire, walks through why the income loss is often larger than the property loss.
Canadian insurers write business interruption on one of two main bases. They measure the loss differently and end at different times, so the choice matters more than most owners realise.
| Profits form | Gross earnings form | |
|---|---|---|
| What it insures | Gross profit: revenue less the variable costs that stop when sales stop | Gross earnings: revenue less cost of goods sold and certain supplies consumed |
| How long it pays | Until results return to normal, up to the indemnity period you choose (often 12, 18 or 24 months) | The period of restoration: the time it should take to repair or replace the damaged property with due diligence |
| After you reopen | Keeps paying while sales recover, if still inside the indemnity period | Stops when repairs are complete unless you buy an extended period of indemnity |
| Underinsurance penalty | Average clause compares your sum insured with annual gross profit | Coinsurance clause based on a percentage of annual gross earnings |
| Usually fits | Businesses with a slow ramp-up after reopening, or complex supply chains | Smaller, simpler operations with a quick return to normal trade |
The profits form usually gives a cleaner result after a serious loss because it measures the actual drop in turnover over the whole recovery. Either form is only as good as the sum insured, so we build it from your financial statements, not a rule of thumb.
The indemnity period, called the period of restoration or period of liability on some wordings, is the maximum time the coverage pays. It starts on the date of the damage, not the date the adjuster finishes.
Owners almost always underestimate it. A realistic timeline counts adjustment, demolition and debris removal, design, permits, contractor availability, the rebuild, re-stocking and re-hiring, and then the months it takes to win customers back. Building costs keep rising too: Statistics Canada reported non-residential construction prices up 3.5% year over year in the second quarter of 2026, which slows insurer-approved scopes and contractor scheduling.
These extensions decide whether the policy responds to the losses that happen around a fire, not only at it. Each is usually sublimited, and the sublimits are often small compared with the main BI limit.
| Extension | What triggers it | What to check |
|---|---|---|
| Extra expense | Costs you incur to keep operating, or reopen sooner, after insured damage | Whether it is included in the BI limit or a separate limit, and whether it must reduce the overall loss |
| Civil authority | An order of a civil authority prevents access to your premises because of insured-type physical damage nearby | The number of weeks it pays and the required distance from the damaged property |
| Contingent business interruption | Insured-type damage at a supplier's or major customer's premises stops your business | Whether suppliers must be named, and whether only direct suppliers count |
| Utility service interruption | Loss of power, water, gas or telecommunications from damage to the utility's property | Waiting period, whether overhead transmission lines are excluded, and the sublimit |
| Ingress and egress | Access to your premises is blocked by damage, even without an order | The time limit and how close the damage must be |
| Professional fees | Accountants' costs to prepare and document the claim | The sublimit; a well-documented claim settles faster |
Utility interruption matters more every year. CatIQ figures released by the Insurance Bureau of Canada put insured severe-weather losses above $2.4 billion in 2025, including about $490 million from the late-March ice storm in Ontario and Quebec. Ice storms bring down lines, and many wordings exclude overhead transmission lines unless you buy them back.
Contingent BI deserves attention if you rely on one supplier or one customer. A fire at your only co-packer, or at the distribution centre of your largest retail account, can stop your revenue with no damage to anything you own. A machine failure at your own site is a different trigger, covered under equipment breakdown.
Hypothetical: a restaurant turns over $1,200,000 a year. Food and beverage costs, which stop when sales stop, run at 35% of turnover. Its rate of gross profit is therefore 65%, and its annual gross profit is $780,000. It carries a profits form with a 12-month indemnity period.
A kitchen fire closes it for five months. It reopens and trades at 70% of normal for three more months before sales recover fully.
Now the trap. If the restaurant had insured gross profit at $600,000 instead of $780,000, the average clause would apply. It carried about 77% of what it should have, so the claim would be cut to about 77%, roughly $300,000. Nearly $90,000 of the loss would fall on the owner even though the claim was well under the limit.
A gross earnings form would calculate a similar loss of earnings, but would stop paying when the kitchen was rebuilt, at five months, unless the policy carried an extended period of indemnity for the slow months that followed.
BI inherits the exclusions of the property policy it sits on, then adds a few of its own. If the physical damage isn't covered, the income loss isn't either.
| Excluded or limited | How to cover it |
|---|---|
| Income loss from flood or sewer backup | Add flood and sewer backup to the property policy, and confirm the endorsement extends to BI |
| Mechanical or electrical breakdown of your own equipment | Equipment breakdown cover with its own BI and spoilage extensions |
| Cyber attack or system outage with no physical damage | Cyber liability cover with network interruption |
| Damage at a supplier's site | Contingent business interruption extension, naming key suppliers where required |
| Losses after a vacancy over the policy limit | Arrange a vacancy permit in advance; see how the 30-day vacancy clause works |
| Pandemic, virus or communicable disease | Generally not available in the standard market; manage through cash reserves and continuity planning |
| Loss of market, delay or penalties under contracts | Not insurable under BI; address in contract terms |
Business interruption is triggered by direct physical loss or damage. A closure order, a drop in customers or the presence of a virus is not the same thing, and Canadian courts have said so.
In SIR Corp. v. Aviva Insurance Company of Canada, 2023 ONCA 778, the Court of Appeal for Ontario dismissed a restaurant group's appeal for COVID-19 closure losses under an all-risks policy. As summarised by Dentons, the court treated direct physical loss or damage as a foundational requirement of the coverage, and held that the pandemic was not an "other catastrophe" under the policy's civil authority clause. Spoiled stock was an indirect consequence of the orders, not direct physical damage.
Many commercial property wordings now also carry an express communicable disease or virus exclusion. The practical lesson is not that BI is weak. It is that BI is specific: it insures the income consequences of physical damage, and nothing else. Risks outside that, such as pandemics or a key person's illness, need their own plan, which our risk management service can help build.
Several products replace income or pay expenses. They respond to completely different events.
| Triggered by | Pays | Usually bought with | |
|---|---|---|---|
| Business interruption | Insured physical damage at your premises | Lost gross profit or earnings, continuing expenses, extra expense | Commercial property policy |
| Extra expense only | Insured physical damage at your premises | Only the extra cost of keeping operating, not lost profit | Property policy, for firms that can relocate quickly |
| Rental income | Insured damage that makes rented units unusable | Lost rent and recoverable operating costs | Building owner's realty policy |
| Equipment breakdown BI | Sudden mechanical or electrical breakdown | Income lost while the equipment is repaired | Equipment breakdown cover |
| Cyber business interruption | A network outage or cyber attack | Income lost while systems are down | Cyber policy |
| Business overhead expense disability | Illness or injury of an owner | Fixed office costs while the owner can't work | Life and health insurance |
BI is priced as part of the property policy. The insurer applies a rate to your BI sum insured, and that rate reflects the same underwriting factors as the building and contents.
The market favours buyers right now. Marsh's Global Insurance Market Index put Canadian commercial property rates down 8% in the third quarter of 2026, which makes this a sensible time to fix an indemnity period that is too short. Our guide to how a business claim actually works shows why the extra months often matter more than the premium.
BI sits best inside a single package with your property and liability. See bundle and save for how we put it together.
Our claims team works with you, your accountant and the adjuster until the final settlement.
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This page is general information, not insurance or legal advice. Coverage depends on your policy wording and the insurer. Speak with a licensed broker about your situation.
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