Run-off cover: the professional indemnity protection people forget when they retire, sell or close

Reviewed by Matthew Bartlett, Director, Apex Insurance Brokers Limited · Published 2026-08-05

Why the risk does not retire when you do

For many professionals, the day they hand over the keys feels like a clean break. The clients are settled, the files are archived, and the last invoice has cleared. What often goes unnoticed is that the liability attached to years of past advice does not close on the same day. A design that later fails, a valuation that is challenged, a piece of advice that a client comes to regret — these can surface long after the work was delivered, and long after the business that delivered it has wound down.

The problem is not that the old work was necessarily wrong. It is that professional indemnity (PI) insurance is structured in a way that catches many people out precisely at the point they stop needing everything else.

Claims-made cover, explained plainly

Almost all UK professional indemnity policies are written on a claims-made basis. That is a crucial distinction from most other business insurance, which typically works on a “claims-occurring” basis — responding to events that happened while the policy was live, whenever the claim eventually lands.

A claims-made policy is different. It responds to claims that are first made against you, and notified to insurers, during the period the policy is in force — regardless of when the underlying work was actually carried out. In practice that means the policy protecting you today can answer a complaint about advice you gave five years ago, provided the claim arrives while cover is running.

The corollary is the part professionals overlook: once the policy lapses and is not replaced, there is nothing left to notify a claim to. If you have simply retired or closed the firm, the advice you gave in prior years is no longer backed by any live insurance at all. The work is in the past, but the protection has gone.

Where run-off cover fits

Run-off cover exists to close that gap. It is a continuation of your professional indemnity protection that stays in place after you stop trading, so that claims relating to your past work can still be notified and dealt with. It does not cover any new work — by definition there is none — but it keeps the door open for the historic liabilities that follow you out of practice.

Run-off is relevant in more situations than just retirement. It typically comes into play when you:

• retire and cease practising altogether;
• sell the business, or sell its client bank, and stop trading in your own name;
• close or wind up a company, partnership or sole trade;
• merge into another firm, where past liabilities may need separate protection;
• change profession and no longer carry a live PI policy for the old activity.

In a sale, run-off deserves particular attention. A buyer purchasing the goodwill or assets of a practice will usually not want to inherit the seller’s historic professional liabilities, and the sale agreement may well require the seller to put run-off cover in place. Leaving this to be sorted out “later” can hold up completion or leave the retiring principal personally exposed.

How long the exposure lasts: the limitation question

A fair question is: for how long could a claim realistically arrive? The answer is shaped by the law of limitation in England and Wales, principally the Limitation Act 1980. As a general rule, claims in contract and in negligence must be brought within six years of the relevant date — broadly, when the breach occurred or the damage was suffered. That six-year window is the reason run-off is so often arranged for a comparable period.

However, six years is not an absolute ceiling. Where damage is latent — not reasonably discoverable at first — the Latent Damage Act 1986 can extend the period, allowing a further limited window running from the point the claimant had the knowledge needed to bring a claim, subject to a long-stop. The practical consequence is that liability can persist well beyond the moment you stopped trading, and the length of run-off you choose should reflect that. Scotland has its own limitation regime, which differs, so firms operating there should take that into account.

When run-off is not optional

For many regulated professions, run-off cover is not merely prudent — it is a requirement of the regulator when a regulated firm closes. Professional bodies across law, surveying, accountancy and financial services commonly set minimum standards for the run-off protection a firm must maintain after it ceases to practise, and can specify a minimum period. The precise obligations differ by profession and by regulator, so you should always check the current rules that apply to you rather than assume.

Even where run-off is not strictly mandated, the reputational and personal stakes are high. Sole traders and partners can be pursued personally for historic negligence. Without run-off, a single claim years into retirement could reach personal assets that a policy would otherwise have protected.

Getting the cover right

A few practical points make the difference between run-off that protects you and run-off that disappoints:

• Limit of indemnity. Run-off should carry a limit appropriate to the work you did — commonly arranged at levels such as £1m or £2m, though the right figure depends on your profession, any regulatory minimum and the nature of past instructions.
• Retroactive cover. The policy should respond to the full history of your past work, not just recent years, so that older matters are not silently excluded.
• Duration. Match the term to your realistic exposure — often several years — bearing in mind the limitation position above and any regulatory minimum period.
• Continuity. Arrange run-off so it takes effect the moment your last active policy ends. A gap in cover is exactly the window in which an uninsured claim can land.

Because run-off is paid for once and then relied upon over a period when you are no longer earning from the practice, it pays to think it through before you finalise a retirement date or a sale. The cheapest moment to deal with it is while your existing insurer relationship is still live; the most expensive is after a claim has already arrived.

The takeaway

Run-off cover is easy to overlook because it protects a version of your business that no longer exists. But claims-made insurance has a hard edge: when the policy stops, so does the protection — while the liability quietly continues. Whether you are winding down next year or negotiating a sale now, treat run-off as part of the exit, not an afterthought to it.

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This article is general information, not advice on a specific policy.