Insurance when selling your business: the workstream nobody owns
Why insurance turns up in the data room
Somewhere between heads of terms and completion, the buyer’s advisers will ask for your insurance. Not casually — as a numbered due diligence request: schedules, claims histories, evidence that cover has been continuous, confirmation that limits match your contractual obligations. A programme that has been quietly patched together over the years reads badly at exactly the moment you want the business to look well run. We cover what that review looks like from the other side in insurance due diligence for funding rounds; a trade sale asks the same questions with more money at stake.
The practical advice is simple: get your own house in order before the buyer looks at it. A pre-sale review of the programme — what is covered, what is not, which policies are claims-made, where the claims history sits — costs a little time now and removes a category of last-minute price chipping later.
Share sale or asset sale: two very different insurance outcomes
How the deal is structured changes what happens to your policies, and the difference matters more than most sellers expect.
Share sale
In a share sale the company itself changes hands, history and all. The policies belong to the company, so in principle they continue — but most commercial policies contain change-of-control provisions, and insurers expect to be told when ownership changes. The buyer will usually fold the company into their own programme at or after completion. The open question is the past: who insures the years of trading that happened on your watch. That is a negotiation point, and it is where run-off cover and deal-specific insurance enter the conversation.
Asset sale
In an asset sale the buyer takes the trade, the kit and the goodwill, and your company is left behind holding its own history. The buyer’s insurance covers the business from completion; it does nothing for work your company did before it. If your company carried claims-made covers — professional indemnity, directors’ and officers’ liability, cyber — cancelling them at completion leaves those past years bare. That is the classic case for run-off.
Run-off: insuring the years you are leaving behind
Claims-made policies only respond to claims made while the policy is live. Stop renewing and the protection for everything already done stops with it — even though claims about old work can arrive years later. Run-off cover keeps a policy alive for claims about past work after the business has ceased or been sold, commonly benchmarked at six years because that is the ordinary limitation period for contract claims, and longer where latent problems can surface. We have written a full explainer at run-off insurance explained; for a sale, the essential point is that who buys the run-off — you or the buyer — should be agreed in the sale documents, not discovered afterwards.
Warranty & indemnity insurance
Most sale agreements contain warranties — statements you make about the state of the business — and you remain on the hook if they turn out to be wrong. Warranty and indemnity (W&I) insurance exists for exactly this: a policy, arranged through specialist M&A insurance markets, that responds if a warranty claim is made. It can be written buyer-side or seller-side, and in larger deals it is often the mechanism that lets a seller walk away with a clean break rather than money held in escrow for years. It is a specialist product with its own underwriting process built around the due diligence itself. We do not pretend it is an off-the-shelf purchase — but we can help you understand whether it fits your deal and access the markets that write it.
Do not cancel anything until the ink is dry
Deals slip. Completion dates move, buyers renegotiate, and occasionally the whole thing collapses the week it was meant to sign. If you have cancelled policies, lapsed renewals or wound down cover in anticipation, you are now running the business you still own without the protection it had — and re-instating cover after a gap is harder than keeping it. Keep every policy running until completion has actually happened, then deal with cancellations, refunds and run-off as a tidy handover. Insurers deal with this constantly; a short overlap costs far less than a gap.
How Apex handles the sale workstream
We act for the seller’s side of this regularly: reviewing the programme before the data room opens, answering the buyer’s insurance questions with documents rather than promises, pricing run-off options early so they can be negotiated rather than absorbed, and keeping cover continuous through a moving completion date. It is a workstream, not a phone call — and it goes best when it starts before the lawyers do.
Frequently asked questions
Do my insurance policies transfer to the buyer automatically?
No. In a share sale the company keeps its policies but insurers must be told about the change of control, and the buyer will usually move the company onto their own programme. In an asset sale the policies stay with your company and the buyer insures the business separately from completion. Either way, what happens to cover should be agreed as part of the deal.
What is run-off cover and do I need it to sell?
Run-off keeps a claims-made policy — professional indemnity, D&O, cyber — responding to claims about work done before the sale, after the business has ceased or changed hands. If your company carried claims-made covers, someone needs to deal with the tail. Whether that is you or the buyer is a negotiation point; six years is the common benchmark.
What is warranty and indemnity insurance?
A policy arranged through specialist M&A insurance markets that responds if warranties given in the sale agreement turn out to be wrong. It can be bought by the buyer or the seller and is often used to give the seller a cleaner break. It is underwritten around the deal’s own due diligence, so it needs to be started early, not bolted on at signing.
When should I cancel my policies?
After completion, not before. Deals move and sometimes fail; cancelling in anticipation leaves the business you still own unprotected. Keep everything running until the sale has actually completed, then cancel, claim time-on-risk refunds where they apply, and put run-off in place in the same exercise.
Will buyers really look at my insurance?
Yes. Insurance sits in almost every due diligence questionnaire: policy schedules, claims history, continuity of cover and whether limits match contractual commitments. Gaps become price negotiations. A pre-sale review of your own programme is the cheapest way to take that lever off the table.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This page is general information, not advice on a specific policy.