Tail Off Professional Indemnity Insurance

[numbersrule]

One of our Clients is considering winding down and may need to make enquiries about Tail Off Professional Indemnity Insurance.

They would be interested in any forum opinions on the correct sequence of events.

For example, when is the best time to make an initial enquiry about Tail Off PI Insurance?

Is there any advantage in deciding to initiate Tail Off Insurance a year early, in readiness for winding down in 12 months time?

Or is it better not to raise this with your Insurers until the last minute?

Many thanks on behalf of our Client.

 

[David Griffiths]

Do they have PI already? In that case the obvious starting point is to ask their current insurer for a quote.

For me everything was handled by the broker. Trading stopped about half way through the insurance year, so that was notified to the insurer and the policy converted to the appropriate form. It then needs to be renewed on the normal renewal date - it wasn't possible to get a price for a six year run-off - and the price will change every year based on claims and the state of the market.

However the impression from reading your question is that they don't have an existing policy which raises the question of why they would want run off insurance but apparently didn't want PI insurance while actually trading. Of course I might have misunderstood

 

[numbersrule]

Thanks David
They do have existing PI.
I was under the impression that Tail Off for 6 years costs about 2.75 x last annual premium. But your description sounds like you still renew every year in a Tail Off.
Is there not an option where the Insurer is effectively paid to take on the remaining liability to enable Dissolution?
The Client is concerned that raising this with their Insurer early might alert the industry to their intentions thereby impacting on workload in the remaining months prior to ceasing trading which may be in 12 months time.

 

[WaveJumper]

Your go to member I would have thought is @Frank the Insurance guy

 

[Frank the Insurance guy]

Hi @B2 Bookkeeper

What your client is looking for is "run-off" insurance.

They do not need to do anything until the point they are no longer trading - at that point they should make their insurer aware.

Depending on your client's industry a 6 year "one-off" policy may be available (I have just done this for one of our IT clients). However this depends on the industry - architects for example will need to renew their run-off cover each year.

In terms of budgeting - the first year of run-off is usually at the same premium as the expiry year of cover. It then reduces each year from then (until it hits the Insurers minimum premium level).

In practical terms, your client will have to work with their existing Insurer - it is rare that a new insurer will take on and provide run-off cover (and if they do, there are usually reasons why the current insurer will not offer run-off cover and the premium by the new insurer will reflect an increases rate!).

In summary:
1. Do nothing until they stop trading
2. Arrange run-off cover with their current insurer at that point

 

[numbersrule]

Thank you Frank
That is very helpful