When a business ceases trading, professional liability exposure does not end. Run-off cover provides essential protection against claims that arise after you stop practising.
What Is Run-Off Cover?
Run-off cover is Professional Indemnity Insurance that continues to protect you after you have stopped trading or retired from professional practice. Because PI operates on a claims-made basis, you need an active policy in force to respond to any claim — even if the work was done years ago.
Why Is Run-Off Cover Necessary?
When a professional ceases trading, their exposure to claims does not cease with them. Clients can bring claims years after the work was performed. Without run-off cover, you would have no insurance protection against these claims.
How Long Do You Need Run-Off Cover?
This depends on your profession and the limitation periods that apply:
- General professional services: Six years from the date of the negligent act (under simple contract)
- Services provided under deed: Twelve years
- Construction and building safety: Up to 30 years under the Building Safety Act 2022 for certain defects
- Solicitors: The SRA requires a minimum of six years' run-off cover
The Cost of Run-Off Cover
Run-off premiums are typically calculated as a multiple of your last annual premium. The cost decreases over time as the likelihood of a claim reduces. Some insurers offer multi-year run-off policies at a discounted rate.
Planning for Run-Off
If you are planning to retire or close your business, discuss run-off cover with your broker well in advance. The terms available while you are still trading are typically better than those offered after cessation.
PLB can advise on the most cost-effective run-off arrangements for your specific circumstances.