When buying a business, it is important to think carefully about insurance as part of the due diligence process. The seller’s policies are tied to their business entity and usually cannot be transferred to you. This means you will need to arrange your own cover moving forward, while also checking that there are no gaps in protection during the handover.

Some key considerations include:

• Run-off cover for the seller: If the business provided advice, design, or certification services, the seller may need run-off cover to protect themselves from future claims relating to past work. This ensures you are not unintentionally exposed to liabilities that belong to the previous owner.
• Your new policies: Once you take ownership, you will need insurance in your own name. This could include Public Liability, Professional Indemnity, Workers Compensation, Business Package cover, Cyber Insurance, or other industry-specific policies.
• Warranty & Indemnity Insurance: For larger or more complex purchases, Warranty & Indemnity Insurance can help protect you against unexpected issues after settlement, such as errors in financial reporting or undisclosed liabilities.
• Industry or licensing requirements: Some businesses have compulsory insurances. For example, engineers and certifiers may need Professional Indemnity, builders may require Building Indemnity, and certain trades have state-based obligations. These should be reviewed early to avoid any compliance issues once you take over.
• Policy gaps and exclusions: You should review whether the seller has had appropriate cover in place prior to the sale. If there were low limits or exclusions, these may impact your risk assessment and negotiations.

We recommend involving us early in the process, even before contracts are signed. We can sign a non-disclosure agreement if required and work with your accountant and lawyer to review the insurance implications. This way we can:

• Review the seller’s policies and identify risks
• Advise on the insurance you will need once ownership transfers
• Help arrange new cover to start from the settlement date
• Ensure a smooth transition with no gaps in protection

Buying a business is a big step. Getting the right insurance in place gives you confidence that your new venture is properly protected from day one. Contact us to find out more today.