KBD Insurance

The importance of having the right insurance coverage for businesses

This summer was straight fire.

But we’re not talking about the parties and festivals. Today, we’re talking literal fires.

This July, Montreal had it’s hottest summer ever. Meanwhile, out West, smoke and wildfire has spread throughout British Columbia and California.

While the devastation has been colossal and horrific, it got us thinking what a crucial role insurance plays in the economy. Without it, it would be nearly prohibitively expensive or even impossible to start the rebuilding process in the wake of devastation.

It doesn’t have to be the threat of natural disasters that makes you wish you had insurance, however. An employee leaving a toaster on too long or putting metal in the microwave could be enough to set your office ablaze. And while it’s normal to say “OH SH*IT” when your office is on fire – having the right insurance plan will alleviate some of that pain.

Here’s how:

Fire insurance essentially boils down to two different but equally important concepts.

First, there’s Commercial Property Fire Insurance. You’ve seen a fire before – you know how devastating it can be. Even the smallest contained fire will likely cause irreparable damage to whatever it touches. Commercial property fire insurance is the part of the policy that kicks in to cover all the physical damage. It covers damage to the physical building (walls, floors, windows), to the property within the building (desks, computers, furniture) as well as damage to inventory and other raw materials. Depending on your policy and deductible, your commercial property fire insurance should cover the repairment and replacement of the property and items damaged in the event of a fire.

So your business is set on fire. Your office and raw materials are damaged. That sucks! But, as we learned in the first half of the policy above, insurance will cover the damages. Let’s imagine the worst case scenario – your office is set aflame and your inventory is damaged. Your policy will cover the damages and replacement. That’s awesome and all but what happens in the interim? You now have nowhere to work and you can only pay your employees from the profits you generate from the sale of your inventory.

That interruption and the forgone revenue are covered in the second part of the policy known as Business Interruption or Lost Profits Fire Insurance. Let’s break that down.

Business Interruption will cover the breakdown of normal business activities. So for example, maybe you need to rent a temporary office, insurance’s got your back. In Lost Profits insurance, your policy will cover lost sales as a result of the fire. So imagine you made a sale dependent on the inventory you have in your office. Lost Profits Insurance will cover the profits you would have made from that sale.

A fire in your office is definitely an inconvenience. There’s no doubt about it. However, with the right insurance coverage (cough, KBD Insurance, cough,) you’ll be back on your feet in no time.

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