Do I need run-off cover when I close or sell my business?

You’ve retired, sold the business, or simply stopped trading. The work is finished, the invoices are paid, the company is being wound up. It feels like the insurance can stop too. For professional indemnity, that instinct is wrong — and expensive.

Why cover has to outlive the business

Professional indemnity is written on a claims-made basis: the policy that responds is the one in force when the claim arrives, not when the work was done. Cancel your policy on the day you close, and a claim about a project you completed three years ago has nothing to attach to. The claimant sues you or the former directors personally, and you fund the defence yourself.

Run-off cover is a policy that continues after you stop trading. It covers claims made during the run-off period relating to work you did before you closed. It writes no new business — it simply keeps the door open for claims arriving late.

How long claims actually take to appear

Longer than most people expect. Errors in advice, design or accounts frequently surface only when something goes wrong downstream — a building defect emerging after several winters, a tax position challenged at enquiry, a structure failing under load, an investment underperforming. The Limitation Act 1980 generally allows six years from the breach for contract claims, and negligence claims can run to fifteen years in some circumstances through the latent damage rules.

That is why six years of run-off is the common benchmark, and why construction-related professionals often hold it longer — twelve years where contracts were executed as deeds.

When it’s mandatory, not optional

Several UK regulators and professional bodies require run-off as a condition of closing, including solicitors, accountants, financial advisers, surveyors and architects, with prescribed periods and minimum terms. Selling your business? The sale agreement will almost certainly require you to maintain run-off, because the buyer doesn’t want inherited liability and the warranties you’ve given need backing. Retiring from a partnership? The partnership deed usually obliges the continuing partners to arrange it — check who is actually paying.

What it costs

Run-off is typically bought as a multi-year block rather than annually. As a rough market pattern, a six-year run-off policy often costs somewhere around 200–300% of your final annual premium in total — so a firm paying £1,200 a year might see a six-year run-off in the region of £2,400 to £3,600, paid up front. Premiums step down over the period because exposure reduces as limitation expires. Figures vary considerably by profession and claims history, and are always subject to underwriting.

Compared to funding a defence personally, it is inexpensive. Compared to nothing, it feels like a cost with no benefit — which is precisely why so many people skip it and then regret it.

Getting it arranged properly

Buy run-off from your existing insurer where possible, at renewal or at the point you cease trading, before the policy lapses. Once cover has expired, arranging retrospective run-off is difficult and sometimes impossible — you’re asking a new insurer to take on unknown historic exposure with no relationship.

Key points to check: the retroactive date must reach back to when you started trading, the limit should match what your old contracts required (not a reduced figure), the period must satisfy your regulator and any sale agreement, and the activities definition must cover everything you ever did, including services you dropped years ago.

The situations people forget

Run-off isn’t only for closure. It also applies when you change legal structure (sole trader to limited company — the old entity’s work needs cover), when you sell a book of clients, when you discontinue one service line while continuing others, and when a company is dissolved but former directors remain personally exposed.

Premier Insurance has arranged run-off cover since 1983 for retiring professionals, firms being sold and businesses restructuring. Talk to us before your final renewal date — that’s the moment where the good options exist.

Related professional-indemnity insurance guides

• How much does professional indemnity insurance cost in the UK?
• What limit of indemnity do I actually need?
• Professional indemnity vs public liability: what's the difference?
• Retroactive dates and claims-made cover explained
• Professional indemnity for consultants and contractors

Speak to a UK insurance broker

Premier Insurance has been arranging UK professional-indemnity insurance since 1983. We are FCA regulated, BIBA members, and place cover with 200+ insurers including Lloyd's of London. Call 020 8908 2426, WhatsApp 07728 305383, or email hello@premier-insurance.co.uk. See our professional-indemnity Insurance page for full cover details.