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Too much time to complete claims is a primary reason your small business clients may decide not to use their business insurance and rely on other higher-cost options, a Rates.ca expert suggests.

“Making a claim can be a lengthy process,” Maz Moini, a commercial insurance expert at Rates.ca, says Thursday. “Insurers need to verify financial losses and ensure the claim meets policy terms, which can mean weeks or even months before funds are released.

“That delay is one reason some business owners turn to credit or loans first, but understanding how coverage works can help them make the right financial decision[s] when emergencies happen.” 

Moini was referencing a September TD Insurance survey that found 94% of 400 polled Canadian small business owners and decision-makers had business insurance, but only 52% would use it in an emergency. Instead, many say they’re still reaching out to other income sources, including credit cards (50%), bank loans (48%) and lines of credit (47%), Canadian Underwriter reported at the time.

More than one-third (36%) of respondents even said they’d rely at least in part on loans from friends and family in an emergency.

TD said misconceptions about insurance coverage appear to be behind the discrepancy, with some policyholders believing commercial insurance is only for major events, such as a hailstorm or fire.

But “there are many situations that could compromise your earning power, depending on the nature of the business,” TD Bank Group said in a Sept. 3 press release. “For example, a restaurant may need to shut down due to water damage from a pipe bursting, or stolen tools may prevent an electrician from being able to accept jobs.”

Rates.ca says TD’s findings reveal a gap between coverage and confidence. Hesitation often stems from uncertainty around how claims might affect premiums, how long payouts take, and what documentation is required, Moini says.

To help small business owners make informed decisions and prepare for the claims process, Moini offers several key considerations: 

  • Assess the size and nature of the loss: Business insurance is best suited for major or unexpected losses that significantly affect operations. For minor incidents below or near the deductible, paying out of pocket may be more practical. 
  • Understand how claims history affects premiums: A single, well-documented claim may have little impact, but frequent or preventable losses can influence renewal pricing. Insurers consider the type, frequency, and cause of claims when assessing risk. 
  • Maintain thorough documentation: Keep detailed financial and operational records throughout the year, including invoices, receipts and proof of insured assets. Having organized documentation readily available helps substantiate claims, speeds up assessment and prevents delays during the claims process. 
  • Plan for potential cash flow gaps: Even valid claims can take time to process. Businesses should maintain access to short-term capital to manage expenses during that period. 

“It’s not a given that premiums will automatically rise just because a business has made a claim,” adds Moini. “Commercial policies are evaluated differently than personal property insurance, and insurers review each case individually. The key is to understand the coverage details before a crisis occurs.”

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Jason Contant

Jason has been an award-winning journalist with Canadian Underwriter for more than a decade, including the past three years as associate editor and, before that, as digital editor for seven years.