Insurance should be considered before the purchase of a business is completed so that appropriate cover can be arranged from the date the buyer takes responsibility for the business.

The seller’s insurance should not automatically be assumed to transfer to the buyer.

Understand what you are buying #

The insurance implications can differ depending on whether the transaction involves:

• Purchase of business assets
• Purchase of shares in a company
• Purchase of a trading name or client book
• Acquisition of property, vehicles or equipment
• Transfer of employees
• Assumption of contracts or liabilities

The legal effect of the transaction should be discussed with your lawyer or other transaction advisers.

Depending on the business, the buyer may need to consider:

• Public Liability Insurance
• Professional Indemnity Insurance
• Business Insurance
• Commercial Motor Insurance
• Cyber Insurance
• Management Liability
• Workers Compensation
• Other occupation-specific insurance

Review the business and existing insurance information #

A buyer should understand what the business actually does, including:

• Services provided
• Contracts
• Employees
• Subcontractors
• Revenue
• Project sizes
• Assets
• Locations
• Previous claims
• Regulatory or contractual insurance requirements

Where the seller previously provided professional services, the seller may need to consider run-off insurance.

Whether liabilities associated with previous work can affect the buyer depends on the transaction structure and is a legal due diligence issue.

Copies of existing insurance schedules, claims histories and policy details can help identify what has previously been insured, relevant business activities, claims history, limits previously carried and significant exclusions. They should not, however, be treated as confirmation that the same insurer or cover will be available to the buyer.

Webber Insurance can assist with the insurance aspects of the acquisition, while legal, accounting and transaction advice should come from the appropriate advisers.

Contact our team if you are buying a business and need insurance arranged for settlement.