What is business interruption insurance and why would an Ontario small business carry it?

Business interruption insurance is designed to replace lost income and cover certain ongoing expenses when your business cannot operate normally because of a covered event, most commonly physical damage to your premises from a fire, water damage, or another insured peril that forces you to close or significantly reduce operations. Rather than covering the cost to repair the physical damage, which is what commercial property insurance handles, business interruption coverage addresses the revenue you lose and the fixed costs you still owe, such as rent, payroll, and loan payments, while you cannot operate.

This matters for small Ontario businesses in particular because a forced closure of even a few weeks can be enough to threaten a business without significant cash reserves, and property insurance alone does not address that gap. Coverage is usually triggered only by damage from a peril your policy actually insures against, and the specific triggering events, the length of coverage, and how lost income is calculated vary by policy, so understanding what your particular policy covers matters rather than assuming broad protection. It is typically purchased alongside a commercial property policy rather than as a standalone product.