Canadian small business owners say they’re ready for the unexpected — but their financial choices suggest otherwise. A new TD Insurance survey shows that while nearly all entrepreneurs (94%) have business insurance, just over half (52%) would actually rely on it first in case of an emergency.
Instead, many report they would first lean on higher-cost financing like credit cards (50%), bank loans (48%) or lines of credit (47%) when emergencies arise. More than one-third (36%) say they would even turn to friends and family for loans.
The results highlight an important gap in how small business owners view and use insurance. While most have some level of coverage in place, misconceptions about when, how and if to make a claim could leave Canadian businesses exposed to unnecessary debt.
Financing the unexpected
The TD survey, conducted by The Harris Poll, points to a disconnect between business owners’ preparedness and their actions under stress. Insurance is designed to provide liquidity and protect cash flow when revenue is disrupted, but many respondents said they would still turn to outside credit.
“Insurance isn’t a last resort – it’s a strategic safeguard,” Tang Trang, vice president, small business insurance at TD Insurance, said in a statement. “If business owners are turning to outside financing, chances are they’re not getting the full value of insurance.”
The reliance on loans and credit cards is especially concerning given Canada’s high interest rate environment. According to Bank of Canada figures, the average new business loan rate stood at 4.90% in May 2025, which shows a small decline from earlier in the year, but borrowing costs for businesses are still far higher than pre-pandemic.
This matches broader trends reported by Statistics Canada, which found that nearly half (49.3%) of small and medium-sized enterprises (SMEs) requested external financing in 2023, most often in the form of debt. Among those, the most common form of debt financing was credit cards — one of the costliest borrowing tools available.
Misconceptions about coverage
Part of the problem may lie in what business owners think their insurance covers. Some assume it only applies to catastrophic events like fires or natural disasters, but many policies are designed to address smaller, business-specific risks.
For example, a restaurant forced to close after a burst pipe or an electrician who loses tools to theft could both be eligible for coverage under a properly tailored policy. Yet if owners don’t fully understand their options, they may miss opportunities to use insurance and instead absorb costs through debt.
Economic uncertainty compounds the issue. Nearly one-third (32%) of small business owners cited rising expenses as their top concern, up from 29% last year. That pressure to preserve cash may be discouraging some from filing claims they’re entitled to make.
Customizing protection, minimizing loss
Experts say the key is ensuring policies are customized to the business’s size, industry and unique risks. What works for a tradesperson won’t necessarily be right for a café owner, and vice versa.
“We know your needs are unique and how important the business you’ve built is to you,” Trang said. “Connecting with a licensed insurance advisor can help you make sense of your coverage and ensure you have the right insurance in place to help safeguard your business from the unexpected – no matter how big or how small.”
With nearly half of Canadian small business owners still prepared to take on high-cost debt in an emergency, the survey underscores a need for better financial literacy when it comes to business insurance. For many entrepreneurs, the safest and most cost-effective lifeline might be the one they’re already paying for.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.