Canadian small business owners may feel prepared for the unexpected but new research suggests they remain hesitant to rely on insurance when trouble hits.
A survey from TD Insurance found that while almost all small business owners (94%) report having business insurance, just over half (52%) said they would actually use it in an emergency. Instead, many would turn first to credit cards (50%), bank loans (48%), lines of credit (47%), or even friends and family (36%).
That reluctance highlights what insurers described as a critical gap in financial planning. Insurance is designed not only to protect against catastrophic losses but also to preserve liquidity and cash flow during operational disruptions.
Tang Trang, vice-president of Small Business Insurance at TD Insurance, said owners should view insurance as a “strategic safeguard” rather than a last resort. When businesses lean on debt or external financing, he noted, they risk missing the full value of protections already in place.
Misconceptions and rising costs
Economic pressures may be reinforcing the reliance on credit. The survey found 32% of owners cited rising expenses as their top challenge, up from 29% last year. Misconceptions around coverage are also at play, with many viewing insurance as useful only for major disasters such as fires or floods.
In reality, business interruption claims, such as a restaurant closing due to a burst pipe or an electrician unable to work after tools are stolen, often determine whether a company can weather short-term setbacks.
A broader trend across North America
The TD findings echo results from Zensurance's 2025 Small Business Confidence Index, which showed declining optimism among Canadian entrepreneurs and concerns about resilience. That report noted that even when owners recognize risks, many delay action on insurance or underestimate its role in keeping operations afloat.
The pattern is not unique to Canada. In the US, industry surveys have found a large share of small businesses remain underinsured, with many lacking sufficient business interruption coverage. Analysts said this hesitation reflects both cost concerns and a lack of awareness, leaving businesses exposed when severe weather, cyberattacks or unexpected closures occur.
With small firms making up nearly 98% of Canadian employer businesses, insurers warn that bridging this awareness gap is becoming increasingly important.
