Navigating Claims-Made Insurance: The Importance of Run-Off Cover

Navigating Claims-Made Insurance: The Importance of Run-Off Cover

There is a crucial aspect of some professional insurances, like Professional Indemnity and Management Liability to name two, that often goes unnoticed – the workings of claims-made insurance and the indispensable role played by Run-Off cover.


In this post, we’ll delve into the mechanics of claims-made policies and the significance of securing Run-Off cover, particularly when contemplating the cancellation of your policy. Additionally, we’ll highlight real-world examples to underscore the importance of this coverage.

Understanding Claims-Made Insurance: The Fine Print of Protection

Professional indemnity insurance serves as a shield for businesses, providing protection when claims arise. However, it’s vital to comprehend the mechanics of claims-made insurance, where coverage hinges on when the claim is made rather than when the incident occurred.

Picture it as a timeline – for the policy to respond, the claim must align with the policy’s active period.

Now, why does this matter? Consider this scenario: you decide to cancel your policy, thinking your business chapter is closed. Yet, if a claim arises after the cancellation date, you may find yourself without coverage. This is where Run-Off cover steps in.

The Role of Run-Off Cover: Extending the Safety Net

Run-Off cover acts as a safety net, extending your protection beyond the expiration or cancellation of your policy. Without it, you expose yourself to potential claims post-cancellation, leaving you vulnerable and uninsured.

To illustrate the significance of Run-Off cover, consider the following scenarios:

    1. The Consultant’s Conundrum:
      • Picture Sarah, a marketing consultant who, having closed her consultancy, bids farewell to her professional indemnity policy. A year later, a former client asserts that her counsel resulted in a marketing catastrophe, demanding reparation. Absent Run-Off cover, Sarah finds herself devoid of insurance protection.
    2. Architectural Oversight:
      • Now, envision James, an architect opting for retirement after a prosperous career. A client from a project undertaken five years ago unearths a structural flaw, leading to a substantial compensation claim. Devoid of Run-Off cover, James confronts financial repercussions in his retirement.

These examples underscore the critical role Run-Off cover plays in safeguarding professionals from unexpected claims that may arise after their business activities cease.

Sole Traders: The Importance of Legal Guidance

For sole traders contemplating the cessation of their business activities, seeking legal advice is paramount. The nuances of individual situations can introduce complexities in understanding continued exposures. Legal experts can provide tailored guidance, ensuring that potential risks are identified and addressed appropriately.

Consider this: your business may be closed, but lingering liabilities could emerge. Legal advice acts as a compass, guiding sole traders through potential pitfalls and ensuring a comprehensive understanding of their post-closure landscape.

Run-Off = A Strategic Approach to Risk Management

As you consider the potential risks associated with the cancellation of your professional indemnity policy, view it as a strategic decision rather than a mere administrative task. Run-Off cover is not just an extension; it’s a strategic layer of protection ensuring a seamless transition into the post-business phase.

Whether you’re a seasoned business owner or a solo entrepreneur, the takeaway is clear: consider Run-Off cover as a fundamental component of your risk management strategy. Protecting yourself from unforeseen claims is a responsibility that extends beyond the active period of your primary policy.

As always it’s important to evaluate your individual circumstances, consider the potential risks, and, if you’re a sole trader, enlist legal expertise to navigate the complexities of post-business exposures.

By doing so, you fortify your professional legacy and pave the way for a secure transition into the next phase of your journey.


If you have a question about Run-Off cover for your circumstances, we’re here to help!

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