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📋 '''Run-off insurance''' is [[Definition:Coverage | coverage]] that remains in effect after an [[Definition:Insurance policy | insurance policy]] or program has expired or been cancelled, protecting the [[Definition:Insured | insured]] against [[Definition:Claims | claims]] arising from acts, errors, or events that occurred during the original policy period but are reported afterward. This concept is especially critical in [[Definition:Claims-made policy | claims-made]] lines — such as [[Definition:Professional liability insurance | professional liability]], [[Definition:Directors and officers liability insurance (D&O) | D&O]], and [[Definition:Errors and omissions insurance (E&O) | E&O]] — where a gap in reporting coverage could leave the insured exposed to latent liabilities. Run-off insurance is sometimes referred to as an [[Definition:Extended reporting period | extended reporting period]] (ERP) or, colloquially, a "tail" policy.

🔄 When a professional retires, a firm dissolves, or a [[Definition:Merger and acquisition (M&A) | merger]] causes one party's policy to terminate, the outgoing insured typically purchases run-off insurance to extend the window during which claims can be reported. The coverage does not expand the scope of the original policy; it simply keeps the reporting door open for a defined period — often one to six years, though some endorsements offer unlimited tails. [[Definition:Premium | Premiums]] for run-off insurance are usually charged as a one-time payment calculated as a percentage of the expiring policy's annual premium, with the exact multiple reflecting the length of the tail and the [[Definition:Loss development | loss development]] characteristics of the line of business. [[Definition:Underwriting | Underwriters]] assess the insured's historical [[Definition:Claims history | claims history]] and the nature of the underlying exposure to price this coverage.

🛡️ Securing appropriate run-off insurance can mean the difference between a clean exit and years of uninsured litigation. For corporate transactions, buyers routinely require sellers to procure adequate run-off coverage for pre-closing liabilities as a condition of the deal, and the cost is often factored into purchase-price negotiations. [[Definition:Insurance broker | Brokers]] who specialize in [[Definition:Transaction liability insurance | transaction liability]] and professional lines play a key advisory role here, helping clients understand the duration and scope of tail coverage they need. From a carrier's perspective, run-off insurance represents a manageable, finite extension of exposure — one that can be reserved with reasonable confidence because the universe of covered acts is already closed, even if the claims themselves have yet to surface.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Extended reporting period]]
* [[Definition:Claims-made policy]]
* [[Definition:Professional liability insurance]]
* [[Definition:Tail coverage]]
* [[Definition:Directors and officers liability insurance (D&O)]]
* [[Definition:Errors and omissions insurance (E&O)]]
{{Div col end}}

Definition:Run-off insurance - Revision history

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