When it comes to insurance policies, in most cases, once you no longer own the asset, you also don’t need the insurance anymore. For example, once you’ve sold a car, you usually cancel the insurance policy for it. However, if you run a professional advice-based business and hold Professional Indemnity Insurance, you might receive claims or complaints after you retire or leave the profession as a result of the advice you provided while you were running your business. For these claims to be covered, you will be required to hold a current policy at the time the claim is made, and this is where run-off cover comes in. So, what is run-off cover and how does it work? Let’s look below.

Professional Indemnity Insurance is designed to help cover you and your business if a client alleges your advice or service caused them a financial loss and takes legal action against you. It can help cover your legal fees as well as compensation you might be required to pay. Allegations of professional negligence of this nature can come about while you’re still practising but can also occur many years after the advice was provided. Run-off cover continues to provide cover for allegations of professional negligence after you’re no longer practicing or have retired. In most cases it is not automatically included under Professional Indemnity policies – it needs to be applied for, and an additional premium will often apply.

Run-off cover is only applicable under some forms of insurance, and Professional Indemnity Insurance is one of them. It applies primarily to policies which are on a ‘claims-made’ basis, which means that for a claim to be covered, the policy must be active at the time a claim is being made. Another example of policies which are claims-made is Management Liability. This is different to other insurance policies (such as Public Liability Insurance), which are occurrence based. Under occurrence-based policies, a policy only needs to be active at the time an incident occurs, even if the claim is made later on.

Run-off cover exists due to the complex nature of providing professional advice or service – sometimes the advice you provide can have long lasting implications. When you’re in the business of providing advice, clients can take legal action against you if they believe you were negligent in your work which led to them suffering a financial loss. These allegations can come about unexpectedly, and you might find yourself quickly overwhelmed with legal fees to defend yourself. Therefore run off cover is important to keep in place, as it can continue to cover you for claims which arise after you’re no longer practising or retire.

In most case run-off cover is not automatically included under Professional Indemnity Insurance. It must be applied for, and an additional premium will apply. If you are about to retire or leave the profession, it is strongly recommended you arrange run off cover before you shut down or retire to ensure you do not have a gap in cover. The cost will vary depending on several factors, such as your occupation, location, the services you provided, and your turnover. Also bear in mind that your premium may not be a one-of payment which will cover you indefinitely and the period of time you’re insured for will need to be negotiated and agreed with your insurer.