Why Is Professional Indemnity Run Off Cover Important?
If you’ve decided to retire, close your business or even sell your business, have you thought about whether you need to continue with Professional Indemnity Insurance? It’s something that we strongly recommend that you do!
Professionals can find themselves liable for professional indemnity claims for many years once they have stopped practising. In many cases, liability ends after six years, however under certain circumstances (particularly where contractual terms require it) they can be liable for fifteen years or more.
Professional Indemnity insurance is generally provided on a ‘claims-made’ basis, meaning that insurance must be held when the claim is made, rather than when the incident occurred and as soon as an insurance policy is cancelled, all cover ceases.
What Is Run-Off Cover?
Run-off cover is a form of Professional Indemnity Insurance that applies when a business or individual stop operating in a particular field. This can be due to various factors such as the business has been sold, its changed direction, it has gone into administration, an individual has retired etc.
The fact that the business has come to an end, does not necessarily mean that the possibility of a claim being made has come to an end.
Claims can arise for years after projects have been completed, and it is vital that businesses maintain Professional Indemnity Insurance for as long as such risk exists. Run-off cover provides continuing indemnity to cover costs that are associated with a claim.
As the likelihood of a claim reduces as time progresses, the cost of a run-off policy generally reduces year on year, although, some insurers offer run-off policies payable with a one-off premium covering a defined number of years (often up to 6 years) as this can reduce the uncertainty of ongoing payments.
The nature of the work that has been undertaken will be an important factor in determining the length of time before a claim is likely to arise. From the date a problem occurs, the statute of limitations holds that a business or individual can be sued for up to six years. Therefore, a minimum of six years run-off cover is generally recommended, although businesses sometimes opt for a shorter period as they may judge that claims are likely to be made earlier rather than later.
What Can We Offer?
We can offer cover for any period from one to six years under one single policy. This means that the hassle of annual renewal is eliminated, and the premium will not rise in the event of a claim.
To organise run-off cover, or if you have any questions, please get in touch with a member of our team.
Posted by Jess Brown on July 12, 2019 in News, Professional Indemnity Insurance | Leave a comment |