Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our opinions or reviews. Learn how we make money.
Compare run-off coverage to protect your company’s past work
Get extended claims coverage for businesses that close or merge.
Run-off coverage protects your business from claims of negligence or damage involving services provided during your previous insurance policy. This allows customers to file claims against your business for several years after your policy ends.
How does run-off coverage work?
Run-off coverage extends your business’s liability after ending the policy, covering past work done by your business. The coverage applies to claims-made policies that only cover claims made while the policy is in force. By buying run-off coverage, a business can end its policy but still file claims for past work that arises several years after the end date.
In most cases, businesses buy run-off coverage when it faces an organizational change like merging with or acquiring another business or closing its doors. Many businesses will buy up to six years of run-off coverage to fulfill their merger or acquisition agreement.
However, run-off coverage only protects businesses for past work. You may need separate liability insurance if you’re continuing your operations.
Run-off coverage in action.
Top Lights is a national company that designs and renovates commercial lighting. Since the company is expanding globally by merging with Lowell Lighting, Inc., the two companies will use Lowell Lighting’s insurance for professional liability and directors and officers liability coverage.
Top Lights should purchase six years of run-off coverage for professional advice given to clients before the merge. Run-off coverage can also protect Top Lights for CEO and other leaders’ decisions before the merge.
Compare business insurance with run-off coverage
Run-off coverage vs extended reporting period
Run-off coverage works similar to an extended reporting period (ERP), also nicknamed tail coverage. However, the main difference is the amount of time the coverage usually lasts. An ERP typically lasts one year, while run-off coverage may be purchased for three or five years.
Businesses with large organizational changes may need run-off over ERP coverage because of the time insured or to meet requirements in a contract. However, professionals like consultants may choose ERP coverage when switching insurance companies.
ERP coverage in action.
Trisha is a digital marketing consultant who keeps professional liability coverage in case of a claim. She decides to switch insurance companies to save money on a lower premium. However, Trisha’s new insurance company will cover some previous work but not all work done under her previous policy. For extra protection, Trisha purchases extended reporting period coverage on her previous policy for one year.
When do businesses need run-off coverage?
Most businesses buy run-off coverage during a major change in structure or control.
- Merges with another business
- Acquires another business
- Closes its doors — This can include individuals like doctors, lawyers or consultants ending their careers.
- Keeps the same insurance company
- Purchases a new policy that covers previous work
- Buys extended reporting period coverage
How much does run-off coverage cost?
The cost of run-off coverage may depend on several factors, including:
- Number of previous claims
- Amount of time since the policy ended
- Coverage previously bought
Your business may buy run-off coverage after ending your previous liability insurance policy to protect against new claims involving your business’s past work. Once you’ve secured enough coverage, consider other types of business insurance you may need for your new business structure.
Frequently asked questions about run-off coverage
More guides on Finder
AKC pet insurance review 2020
Work with a brand name staffed by professionals who understand your breed’s needs.
Do I need multifamily home insurance?
Welcoming extended family or friends to live in your home is fine with your home insurer, but you might need to tweak a few coverage types.
Compare van dweller insurance
Nail down the right insurance for your budget and van type, including converted vans or Sprinters.
Compare the best auto and renters insurance bundles
The best companies blend wide auto and renters coverage, free perks and strong value.
Compare the best bundling insurance companies for 2020
Your top choices for pairing the best savings, options and service when buying multiple insurance policies.
Grundy classic car insurance review October 2020
Protect your classic as well as your daily driver with steep liability coverage all on one policy.
What is a combined single limit car insurance policy?
This type of limit applies to liability coverage, but it’s most common with commercial car insurance.
How to protect your business from looting and vandalism
Take steps to keep you and your business safe amid violent demonstrations and minimize damage.
Does my business insurance protect me from vandalism and looting?
Your business insurance policy should pay for vandalism and looting — but you’ll need to document the damage.
Everyday Life insurance review 2020
This startup insurer helps you ladder your policies so you only buy the coverage you need.
Ask an Expert