Independent professionals and businesses often secure indemnity insurance to protect them from lawsuits that arise from their professional work. These policies only cover claims made during the original policy period, which typically coincides with the period of time an individual or business remains active. However, legal claims can crop up after a professional retires or a business closes.
In essence, run-off insurance provides continuing coverage against liability after a person retires from an industry or a business permanently closes its doors. Run-off policies protect professionals against personal financial liability related to actions taken as a professional. Some indemnity policies include a provision that provides a period of run-off insurance, such as five years, while some insurers provide run-off insurance separately from policies for active professionals and businesses.
When Run-Off Insurance Isn't Necessary
Run-off insurance exists for the individual or business that no longer offers services. In cases where an individual retires, but the business continues to offer the same services, the business’s indemnity insurance should protect the retiree against claims. In some business acquisitions, the business making the purchase assumes complete liability for any claims against the work of the purchased business. By assuming all liability, the acquiring firm frees the professionals from the purchased business from the need to purchase run-off insurance.