NOVA SCOTIA: From cyber threats and supply chain disruptions to property damage and lawsuits, Canadian businesses face growing risks every day.
Many assume their commercial insurance has them fully protected, but common misconceptions can leave costly gaps that only come to light when it’s time to file a claim.
“There’s often a false sense of security when it comes to business insurance,” says Maz Moini, commercial insurance expert at Rates.ca.
“People assume they’re covered for everything, but the reality is most policies have exclusions, conditions, and coverage limits that can catch them off guard.”
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Moini highlights six of the most common (and costly) commercial insurance myths:
- All types of damage are covered. Many business owners believe their policy protects against any kind of damage, but standard commercial property policies often exclude flood, mold, and earthquake damage unless those risks are specifically added by endorsement. If the loss isn’t caused by a covered peril, the claim is likely to be denied.
- Business interruption protects against any income loss. Business interruption (BI) coverage only applies after a covered physical loss and typically has a waiting period before it begins. It often doesn’t cover losses from power outages, pandemics, or supply chain disruptions. Even when the claim is valid, most policies cap BI coverage at 12 months — which may not be enough time for a full recovery. Businesses can extend this period, but it must be arranged in advance and often comes at an added cost.
- The policy pays for full replacement, no matter what. While some assume they’ll receive full replacement value, many policies offer actual cash value instead, which deducts for depreciation. Businesses that undervalue their property could also be hit with coinsurance penalties when making a claim.
- General liability covers cyber attacks. CGL policies are not designed to cover data breaches, hacking incidents, or privacy violations. These risks require a separate cyber liability insurance policy to ensure proper protection.
- Everything on-site is automatically insured. Items like leased equipment, contractor tools, or customer property may not be covered unless they are specifically declared in the policy. Coverage for off-site or mobile property often requires separate inland marine insurance.
- Any lawsuit will be covered by insurance. Business owners sometimes assume all legal action will trigger coverage, but a CGL policy only responds to lawsuits involving damages from a covered cause of loss. Claims related to contractual disputes, fines, or intentional acts are commonly excluded.
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“After recent events like the Jasper wildfire, it became clear just how many businesses are underinsured — but these gaps aren’t limited to natural disasters,” says Moini.
“Everyday claims for things like equipment damage, liability disputes, or cyber incidents can expose the same issues.
“That’s why it’s important to ask the right questions, understand your policy exclusions, and make sure your coverage reflects the real risks your business faces.”
