How is a business interruption claim calculated in Canada?
Most Canadian policies insure loss of gross profit — revenue minus variable costs that stop during the shutdown. You calculate the gross profit that would have been earned during the indemnity period, add continuing fixed expenses and extra expenses incurred to reduce the loss, and subtract expenses that were saved. The result is capped at your policy limit.
What is the indemnity period in a business interruption policy?
The indemnity period is the maximum length of time the insurer will pay for lost profit — commonly 12, 18, or 24 months. It runs from the date of loss until the business returns to its pre-loss level, subject to that maximum. A longer indemnity period costs more but protects slow-recovering businesses.
Does business interruption insurance cover COVID-19 or pandemic losses?
Usually not. Most Canadian policies require direct physical damage to the property to trigger business interruption coverage, and many contain virus or communicable disease exclusions. Coverage disputes over pandemic losses have largely favoured insurers, though outcomes depend on the specific wording.
What is extra expense coverage?
Extra expense coverage pays the additional costs you reasonably incur to reduce the interruption loss — such as renting temporary premises, leasing equipment, or paying overtime. It is often included with business interruption coverage and can be claimed even where it exceeds the profit it saved, within limits.