Errors and omissions insurance policies typically run for 12 months, but people can submit claims against you or your business six years after the ‘mistake’ took place.
That’s why you need to consider buying ‘run-off’ insurance that will provide cover once you have retired, ceased trading, or sold your business.
Run-off insurance protects you against claims that occurred while your business was operating, and the subsequent length of time you will need insurance for can vary depending on the types of contract you signed while in business.
Cover is normally required for at least six years, the time period specified under the Limitation Act for clients to bring claims for negligent advice.
However, claims in tort can be extended by a further three years from the date you became aware of the action against you, while contracts signed ‘in deed’ or under seal can have a 12-year time limit.
In all cases there is an absolute cut off of 15 years to bring a claim, so you may need to continue run-off cover for years after you cease trading. If you have sold your business, it is possible the purchasing business might provide this ongoing cover for you.
Some regulatory bodies may make it a condition on their members to maintain run-off cover for a certain amount of time after they cease trading.