You may have heard of run-off insurance*, but do you really know what it provides cover for?
Run-off cover is a policy provision that can help protect you for a set period after you have retired, sold your business, or ceased trading. It is commonly offered with Professional Indemnity insurance policies.
To properly understand run-off insurance, and why you may need it, we first need to explore claims-based policies and Professional Indemnity insurance.
Claims-based policies and Professional Indemnity insurance basics
First off: Professional Indemnity insurance. What is it, and what does it cover? If you’re a professional, then this kind of insurance protects you against claims of negligence or breach of duty as the result of a client receiving professional advice or services from your business. We all make mistakes, and even the most diligent of professionals can sometimes slip up. This is why many people choose to take out Professional Indemnity insurance.
Professional Indemnity insurance is what’s known as ‘claims-based’ or ‘claims-made ’ insurance. Claims-based insurance policies allow you to make a claim so long as you have an active policy. If you make a claim after your policy has ended, even if the incident occurred during the time you held that policy, you will not be covered.
This is where run-off insurance comes in.
What is run-off insurance?
Run-off insurance is designed to protect you from claims which may eventuate after you have stopped operating your business. It provides cover for any acts, errors or omissions that may have occurred during the course of your work prior to you ceasing business.
Professional Indemnity insurance policies are claims-made insurance, which means they only cover claims which are made while the policy is active. The purpose of the run-off insurance is to extend your protection beyond the last date of your business trading. This means that if you decide to sell or close your business, and no longer need Professional Indemnity insurance, then you will likely still be covered by your run-off insurance.
Not only is Professional Indemnity insurance commonly required in many industries, run-off insurance may also be a mandatory requirement for some.
How long should run-off cover last for?
It is up to you and your business situation when deciding how long your run-off cover should last for. It’s important to take different elements into consideration, such as the type of profession you have or had, ad the risk of a claim occurring after you have ceased operating.
Most insurers offer Professional Indemnity run-off cover for a period of up to 7 years. It is typical that run-off cover is only able to be purchased once for a selected period of time by the insured.
How do I purchase run-off cover?
If you need to get your Professional Indemnity or run-off insurance sorted for your business, get in touch with BizCover. We provide multi-year run-off options ranging from one to seven years, as well as quotes from multiple leading Australian insurers for your business insurance needs.
