Top 5 things to think about when buying or renewing your business coverage

December 11, 2019

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A recent court decision reminds us of the importance of why policyholders should carefully read and more importantly understand their insurance policies.

LA Rose Bakery 2000 Inc. v. Intact Insurance Company related to a coverage dispute from the December 2013 ice storm in Ontario. The storm caused significant damage to power transmission lines leaving many businesses, including La Rose, without power.

La Rose suffered losses and sought recovery for business interruption losses and inventory spoilage. The insurer denied the claims due to specific exclusions in the policy wordings (regarding the physical location of equipment damage). Both the motion judge and the Ontario Court of Appeal sided with the insurer. (See 2019 ONSC 236 and 2019 ONCA 850 for additional details on the case and the reasons for the decision.)

Experiencing an insurance claim with a consequent loss of income or large sums of unexpected expenses can be a stressful situation for any business owner. Making sure your business is adequately insured is the first step in managing that stress.

Here are the top five things to think about if you are looking to buy or renew your business coverage: 

  1. Risk identification: List all of the risks to your business and what corresponding types of coverages are available and required.
  2. Loss exposure: What’s the maximum loss exposure to your business in a total loss scenario? And are the limits and recovery periods being insured adequate? For example, an appropriate consideration of growth or slowdown expected in your business for the next two years.
  3. Read the fine print: Is there a co-insurance clause? If so, how much of the maximum loss exposure is your business willing to self-insure?
  4. Understanding what isn’t covered: Conduct a detailed review and be aware of all the exclusions within the policy wordings.
  5. Response team: Be ready to assemble your response team in the event a claim needs to be filed.

BDO can help

We have a team of experienced professionals that advise businesses when buying or renewing their coverage. We also help assist businesses with the recovery in the event of a claim.

Need guidance on navigating the complexities of insurance and determining the appropriate limits your business needs? Contact our Commercial Insurance Loss Accounting team to find out how we can help.

Jay Ahluwalia, CPA, CA, CBV, CFE, CFF
Director, Forensics & Litigation Support
Financial Advisory Services