How long should I maintain run-off insurance in Australia?

You should typically maintain run-off cover for at least seven years. While the statute of limitations for professional negligence is generally six years across most Australian states, maintaining cover for seven years provides a practical buffer to align with business record-keeping requirements and ensure you are protected for claims filed right at the end of the limitation period.

Is professional indemnity run-off insurance tax-deductible?

Yes, run-off insurance premiums are generally tax-deductible for Australian businesses and professionals. The Australian Taxation Office (ATO) views these premiums as an outgoing incurred in the process of gaining assessable income from your previous professional activities.

Does run-off insurance cover new professional work or advice?

No, run-off insurance only provides cover for claims arising from acts, errors or omissions that occurred before your business ceased operating. If you resume providing professional services or advice, you must obtain a new active professional indemnity policy to be covered for that new work.

Can I pay for my run-off insurance as a single upfront premium?

Yes, many Australian insurers offer multi-year 'single premium' options that allow you to pay once for a set period, such as six or seven years. This is often more cost-effective than annual renewals and protects you from future market premium increases.

Is run-off insurance compulsory for Australian medical practitioners?

Yes, maintaining indemnity cover is mandatory. However, most eligible practitioners do not have to pay for this personally after retiring; they are covered by the government-funded Run-off Cover Scheme (ROCS). This scheme provides run-off cover at no direct cost to doctors who have retired (aged 65+), ceased practice due to permanent disability, or met other eligibility criteria.

Who is responsible for run-off insurance when a business is sold?

The responsibility for run-off insurance is typically determined by the specific terms and conditions of the business sale agreement. In many cases, the seller retains responsibility for their own run-off cover to ensure they are personally protected from future claims relating to their period of ownership.

What is Run-off Cover? Quick and Easy Guide

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Run-off cover protects past business work from future negligence claims after you have closed.
It's recommended to maintain run-off cover for at least six years due to legal claim limits.
Cost generally decreases over time but many insurers only offer run-off cover to existing professional indemnity clients.

Is it necessary?

Professional Indemnity Insurance covers business professionals against claims of negligence due to an alleged omission, act or breach of professional duty. This could include providing inaccurate information or failing to perform a service adequately, with the result that their client suffers a loss.

And while most professionals hold Professional Indemnity Insurance over the lifetime of their business, because claims can be made retrospectively even after they have retired or their business has closed, Professional Indemnity Insurance including run-off cover remains a necessary cost they must continue to bear.

Run-off insurance is underwritten on a 'claims made' basis (only covers claims made while the policy is in force, regardless of when the act took place), meaning even though the business is no longer in operation, it must continue to hold run-off cover in case a claim is lodged at some time in the future.

Finder survey: Do Australians think business insurance is worth it?

Response
Yes	74.19%
No	25.81%

Source: Finder survey by Pure Profile of 1112 Australians, December 2023

What will it cost?

Run-off cover will initially cost roughly the same as normal Professional Indemnity Insurance in the first year after the business closes and the run-off period begins. After that, the longer the business has been closed, the less run-off cover will cost, although it will take several years to reduce significantly, given that from the insurer's perspective, there is still a high chance of a claim during this time.

Six years is considered to be the minimum time run-off cover should be maintained for, as this is the time limit for lodging a claim under both breach of contract and tort law, although circumstances will differ with each business.

Am I eligible?

To be eligible to purchase run-off cover, the previous business must be no longer operating. Many insurers will also only provide run-off cover to existing clients who have held Professional Indemnity Insurance with them in the past.

Can sole traders get cover?

Sole traders can purchase run-off cover and need to do so more than most. This is because if one partner in a normal business retires, the Professional Indemnity Insurance is usually maintained by the remaining partner to protect the business. But being an only practitioner, a sole trader closing their business would need to continue protecting themselves, even after retiring.

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Frequently asked questions

You should typically maintain run-off cover for at least seven years. While the statute of limitations for professional negligence is generally six years across most Australian states, maintaining cover for seven years provides a practical buffer to align with business record-keeping requirements and ensure you are protected for claims filed right at the end of the limitation period.
Yes, maintaining indemnity cover is mandatory. However, most eligible practitioners do not have to pay for this personally after retiring; they are covered by the government-funded Run-off Cover Scheme (ROCS). This scheme provides run-off cover at no direct cost to doctors who have retired (aged 65+), ceased practice due to permanent disability, or met other eligibility criteria.

Finder writers are subject matter experts and use primary sources, in-depth research and interviews with other experts to ensure you're getting accurate, up-to-date information. Articles are fact checked in line with our editorial guidelines.

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Written by

Alex Reid

Expert

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Alex Reid is Finder’s business insurance cadet. He has a Master of Marketing from the University of Technology Sydney, with a background in business and sales. When not writing about business insurance for Finder he's a keen scuba diver, recently completed his 200th hour underwater and his PADI Divemaster certification. Before working at Finder he lived in Hangzhou China, where he studied Mandarin and Chinese culture. See full bio

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Run-Off Insurance

Run-off cover is a type of liability insurance held within a Professional Indemnity policy which provides cover for work done by a business in the past.