Run Off Insurance
When you cease to trade or simply retire you still need to continue to protect yourself against any subsiquent claims made against you. RICS members will be well aware that they have a mandatory requirement to maintain PI insurance for a minimum period of six year from when they cease to trade, this is known as RUN OFF Insurance.
Remember that you can only notify potential claims under a current professional indemnity policy, yet there are many circumstances where you will not become aware of these until after you have done the work. Indeed it could be many months or even years after the works have been completed when your client contacts you. It is not the insurer that you were with when you undertook the work that is relevant, but the one you are with on the day you become aware of the possible claim!
Run Off insurance is not offered by all insurance companies, and a number of those that do offer this will only consider it for their existing clients who were insured with them whilst they were in practice. By contrast Anchorman Insurance is very active in this market and has exclusive arrangements for both annual and block run off policies. We offer this facility to both new and existing customers alike.
Block Run Off / Annual Run Off
Once you cease to trade you will need to decide whether to arrange a block Run Off policy, whereby you pay a one off single premium and receive a policy that last for a number of years (normally six) or whether to by your Run Off on a year by year basis. In our experience the block policy option is normally favoured as this gives certainty as to the closing down cost of the practice in respect of insurance and in virtually every case is considerably cheaper than buying it on a year by year basis.
The word of warning is that there are no refunds upon cancellation of the block policy and therefore you need to be certain that you do not intend to start trading again during the life of the policy.
There is a misconception that if you buy your Run Off on a year by year basis that each year the premium will significantly reduce. You cannot make this assumption as the premium is recalculated each year based on current premiums which could have increased. The Run Off discount does increase each year, however if the market has hardened significantly it is concievable that your premium could still increase. Also should you have been unlucky enough to have made a claim during the year, the insurer will take this into account when calculating the renewal premium. With a block policy the premium is fixed at the begining and therefore such changes do not have any impact.
Currently we are aware of only 2 RICS approved insurers that offer block run off policies and we have access to both. Indeed one of them will only offer quotations if the enquiry comes from Anchorman Insurance and they will not offer a quotation direct to you or via any other broker.
If you are considering closing down your practice, call us on 01837 55777