It is estimated that between one-third and one-half of all businesses have no business interruption insurance. Almost half of businesses that experience a serious loss never reopen and over one-fourth of those that do, close within 3 years. A major reason that many businesses don't survive a serious loss is the lack of business interruption insurance or inadequate limits of that coverage. 
What is business interruption insurance, and why is it needed? Business interruption pays for the business' loss of profit and expenses that continue while the business is not fully operational during repair or relocation following a loss. Business income insurance covers three types of losses or expenses that occur while the business' operations are interrupted or curtailed: (1) loss of profits, (2) continuing expenses, and (3) extra expenses.
Business interruption coverage is offered as part of two major types of business insurance packages. First, half or more of all businesses are eligible for "Business owners" package policies. These are package policies that incorporate many of the most commonly needed insurance coverages. Most "BOP" policies, as they are often called, include business interruption insurance without any specific dollar limit, but rather a time limit which is typically 12 months. Following major disasters, a year's worth of virtually unlimited coverage can mean the difference between survival and business failure. Unfortunately, not all businesses are eligible for a BOP policy. 
All other businesses are usually insured under a Commercial Package Policy. These Commercial Package policies are tailored to an insured's needs often with separate polices insured by multiple insurance companies. A downside though, is that the coverages normally built into a BOP policy must be added separately in a Commercial Package. Business interruption insurance is a good example of one such coverage. Unlike a BOP policy, when you buy the policy separately the insured has to pick a dollar limit and as well as a time limit for business interruption insurance.
The biggest problem with this approach is that many business owners grossly underestimate the amount of coverage they need during the coming year. To determine the proper limit, the business owner must decide how long it would take to rebuild or, relocate and restore operations to their pre-loss level. Next, he or she must determine what would be the worst time of year for such a loss to occur, how much profit would be lost, and what expenses would continue or increase during that specific time period. If the business is new or rapidly growing, the business owner can easily underestimate the amount of insurance needed.
Also, keep in mind that, after the business reopens its doors after several months, the level of business will almost certainly not be the same. Therefore, the business owner may need to purchase what is called "extended period of indemnity" coverage. This pays the difference between what the business would have earned if it had never had a loss and its actual depressed income stream while it rebuilds its customer base.
One of the reasons some business owners don't purchase this coverage is because, as you can see, it can get rather complicated. That's why it is important to seek the counsel of a good independent insurance agent who is experienced in placing commercial insurance, such as AnCap Insurance.
