Closing a business is a big step, whether you’re retiring, moving on to a new venture or simply taking a break. 

But even after you’ve shut the doors, there’s one thing that might linger: the risk of claims made after closure for work done while you were operating.

That’s where run-off cover comes in. 

You might be wondering what run-off cover is, and do you really need it.

Let’s break it down with some practical insights to help you decide.

What is a Run-Off Cover?

Run-off cover is a type of Professional Indemnity Insurance that protects you against claims made after your business has stopped operating. 

It covers liabilities from work you did while your business was active. 

Think of it as a safety net for things, such as errors, omissions, or negligence that clients might only discover or decide to pursue later.

Imagine this:

You’re an accountant who closed your practice in 2025. 

A client from 2023 claims you made a mistake on their tax return, and they’re now facing penalties. 

Even though your business is no longer running, you could still be sued. 

Run-off cover steps in to help cover legal costs and any settlements.

Why Does Run-Off Cover Matter To You?

When you close your business, you might think you’re done with all responsibilities. 

But claims can pop up months or even years later, depending on the type of work that was completed. 

In Australia, some industries face long ‘limitation periods’ during which claims can be made. 

For instance:

• Contractual Claims: Up to 6 years from the date of the breach, or even longer in some cases like deeds.
  
  
• Negligence Claims: Often 6 years from when the damage is discovered, which could be well after you’ve closed your business.
  
  
• Building and Construction: In NSW, claims for defective work can be made up to 6 years after the work is completed, or even 10 years for major defects under the Home Building Act 1989.

Without run-off cover, you’d have to pay for legal fees or settlements out of your own pocket, which could be financially devastating.

Do You Need a Run-Off Cover?

Not every business needs run-off cover, but it’s worth considering if your work involves giving advice, providing services, or delivering projects that could lead to claims down the track. 

Here are some factors to help you decide:

Professionals, including accountants, engineers, architects, consultants or financial advisors, are at higher risk because their advice or services can have long-term impacts.

If you’re in retail or a low-risk trade (e.g., selling goods with no ongoing liability), you may not need it.

Some professional bodies, like the CPA Australia or the Financial Advice Association Australia (FAAA), require members to maintain run-off cover for a certain period after ceasing practice.

Check your industry’s regulations to avoid surprises.

If your contracts include clauses holding you liable for errors after the project ends, run-off cover can protect you.

For example, construction contracts often have long defect liability periods.

Even if you think your work was flawless, clients can still make claims. Run-off cover ensures you’re not caught off guard.

How Long Should You Keep a Run-Off Cover?

There’s no one-size-fits-all answer, but a good rule of thumb is to maintain cover for as long as claims can legally be made against you. 

Here’s a quick guide to help you:

How Much Does Run-Off Cover Cost?

The cost of run-off cover varies based on:

Unlike active Professional Indemnity Insurance, run-off cover is often more affordable because you’re no longer taking on new work, which reduces the insurer’s risk. 

Premiums may also decrease over time as the likelihood of claims drops. 

Here at Tank Insurance, we can help you make the right choices before your run-off cover kicks in. 

Tips for Getting Run-Off Cover

If you’re thinking about run-off cover, here’s how you can approach it:

1. Talk to a Broker Early 

Before closing your business, speak with an insurance broker to understand your risks and options, and to help you compare policies to find the best fit.

2. Review Past Work 

Look at your contracts and projects to identify potential liabilities.

3. Notify Your Insurer

Some policies require you to notify your insurer within a certain period after closing to secure run-off cover.

4. Have a Budget for It

Factor the cost into your business wind-down plan to avoid surprises.

5. Keep Records

Store business records, contracts and client communications securely. They’ll be crucial if a claim arises.

Is Run-Off Cover Worth It?

Run-off cover can give you peace of mind, ensuring that your previous work doesn’t come back to haunt you whether you own a big or small business, or you’re engaged in a solo trade or high-risk profession.

As an insurance broker, we’ve seen how run-off cover can make a difference, from protecting personal finances to meeting professional obligations.

If you’re still unsure whether you need it, you can reach out to us for expert advice and assistance. 

We can help assess your business, explain your risks, and find a policy that fits your budget, so you can close your business with confidence and get that well-earned break.