Disasters Happen. Is Your Business (and Your Insurance) Ready?
Fires, floods, and earthquakes don’t just destroy buildings, they disrupt businesses, wipe out inventory, and leave owners scrambling for financial recovery. Even if you’re lucky enough to avoid direct damage, the ripple effect of natural disasters can hit your bottom line in ways you might not expect. One of the biggest aftershocks? Rising insurance premiums. As catastrophic events increase in frequency and severity, businesses across Canada are seeing higher insurance costs, stricter policy conditions, and reduced coverage options.
If you own a small business, now is the time to understand these risks – before they cost you more than you expect.
Natural Disasters Are Driving Up Insurance Costs
The reality is clear: insurance rates are going up—and extreme weather is a major reason why.
- Water damage is now the number one insurance claim in Canada – Floods, burst pipes, and leaks now make up 44 per cent of total claims, surpassing fire. As losses pile up, insurers are raising premiums and adjusting policies.
- Wildfire risk is increasing across Canada – With longer and more intense fire seasons, insurers are tightening coverage requirements. In some high-risk areas, businesses are even struggling to secure policies at all.
- Earthquake preparedness is a growing concern – British Columbia, in particular, faces an increased risk of a major seismic event, which could lead to catastrophic losses. Insurers are adjusting deductibles and requiring businesses to prove they have contingency plans.
The result? Even businesses that haven’t made claims are seeing higher rates as insurers adjust for rising risks and catastrophic payouts.
What This Means for Small Business Owners
- Higher deductibles: Businesses in high-risk areas are now facing steeper deductibles – sometimes 10-20 per cent of their insured value for earthquake policies.
- More coverage exclusions: Some insurers are limiting coverage for flooding and wildfires, leaving businesses to pay out-of-pocket for certain damages.
- Premium increases across the board: Even businesses outside of high-risk zones are seeing year-over-year rate hikes as insurers spread the cost of major claims across policyholders.
How to Protect Your Business (and Keep Insurance Costs Down)
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FIRE: Plan for Recovery Before You Need It
Fires remain one of the most devastating risks to small businesses. While insurance can help with rebuilding, the biggest danger isn’t the flames – it’s the business interruption.
Did you know? A moderate fire forces 43 per cent of businesses to close permanently, and of those that reopen, nearly a third fail within three years.
Reduce Your Risk:
- Review your fire safety plan and train employees on emergency protocols.
- Upgrade outdated electrical systems and maintain fire suppression equipment.
- Check your insurance policy for business interruption coverage—not all policies include it!
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Earthquakes: The Hidden Financial Risk
In BC, experts predict a 30 per cent chance of a major earthquake in the next 50 years. But even if your business survives the shaking, you may not escape the financial impact.
Many businesses are shocked to learn that earthquake insurance deductibles are calculated as a percentage of their total insured value – often between 10 per cent and 20 per cent.
Reduce your risk:
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- Consider an earthquake deductible buy-down policy – This lowers your deductible, reducing financial exposure.
- Review your business interruption insurance – Does it cover supply chain disruptions caused by an earthquake elsewhere? Many policies don’t.
- Secure heavy equipment and inventory – Simple retrofits can prevent thousands of dollars in damage.
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Water Damage: The New Fire
With extreme weather events on the rise, flooding is now a leading cause of business losses. From storm surges to burst pipes, water damage claims are growing – and so are premiums.
Many commercial policies now exclude certain types of flooding, meaning businesses without specialized coverage may face unexpected repair bills.
Reduce your risk:
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- Upgrade plumbing and leak detection systems – Install shut-off valves and moisture sensors to catch leaks early.
- Know your coverage – Check your policy for exclusions related to flood damage.
- Understand your lease obligations – If you rent your space, determine whether you or your landlord is responsible for water damage repairs.
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Wildfire: The Spreading Threat
Longer and hotter wildfire seasons are putting more businesses at risk – even those outside traditional danger zones. As a result, some insurers are tightening coverage restrictions or increasing premiums for businesses located near wooded areas.
Reduce your risk:
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- Create a defensible space around your business – Remove dry vegetation and store flammable materials away from the building.
- Check your coverage annually – Policies can change, and coverage for wildfire damage may be limited.
- Have an evacuation and continuity plan – Know how you’ll protect your employees, data, and inventory if a fire approaches.
How to Keep Insurance Costs Manageable
While natural disasters may be out of your control, your insurance strategy isn’t. Here are a few ways to stay ahead of rising rates:
- Work with a broker – A good broker can compare policies, find gaps in coverage, and negotiate better rates based on your specific risks.
- Invest in risk reduction – Insurers reward businesses that take proactive steps to mitigate damage.
- Review your policy annually – Don’t assume last year’s coverage is still the best fit for your needs.
The Bottom Line: Don’t Just Insure – Prepare
Disasters will keep happening. Insurance rates will keep rising. But small businesses that plan ahead, understand their risks, and take preventive action will be in a stronger position to weather the storm – both financially and operationally.
The best time to prepare? Before the next disaster hits.
Key Takeaways for Business Owners:
- Expect insurance rates to continue rising due to increased natural disasters.
- Review your policy carefully – check for exclusions, high deductibles, and business interruption coverage.
- Take steps now to reduce risk – better fire protection, plumbing upgrades, and disaster planning can lower your premiums and prevent losses.Work with an insurance broker to find the right coverage for your business’s unique needs.
About the Authors
Linda Buckton
Vice President,
Client Executive
T: 403-451-4147
lbuckton@bflcanada.ca
Gina Seitz
Vice President,
Client Executive
T: 604-678-5419
gseitz@bflcanada.ca
