Professional Indemnity Run-Off Cover in Australia 2026: What Retiring Professionals and Closing Businesses Must Know

When an Australian professional retires, sells their business, or winds up their practice, one of the most commonly overlooked risks is the gap in professional indemnity (PI) insurance coverage. Because PI policies operate on a "claims-made" basis -- meaning the policy must be active when a claim is lodged, not when the work was performed -- ceasing to renew your policy the moment you close your doors can leave you personally exposed to claims arising from years of past work. Run-off cover is the solution, and an experienced insurance broker is your best guide through the process.

Understanding Claims-Made Professional Indemnity Insurance

Professional indemnity insurance in Australia is almost universally written on a claims-made basis. This is fundamentally different from occurrence-based policies (such as public liability), where coverage applies to incidents that occur during the policy period, regardless of when the claim is made.

Under a claims-made policy, the insurer responds to claims that are first made against the insured during the policy period. If a client lodges a complaint or commences legal proceedings after your policy has lapsed -- even if the alleged error occurred years earlier when you were fully insured -- there is no active policy to respond. The claim falls entirely on you personally.

This structure creates a specific and serious risk for professionals who retire, sell their practice, or close their business. The work you performed over your entire career remains a potential source of future claims, and without run-off cover, you bear that risk personally.

What Is Professional Indemnity Run-Off Cover?

Run-off cover (also called "tail cover") is a form of professional indemnity insurance that provides ongoing protection for claims arising from work performed before the policy''s inception date. It is specifically designed for professionals who have ceased practice and no longer need active coverage for new work.

When you purchase run-off cover, you are essentially extending the claims-made period of your previous policy into the future, without the need to maintain an active practice. The policy will respond to claims made during the run-off period that relate to professional services you provided before you ceased practice.

How Long Should Run-Off Cover Last?

The standard recommendation from insurance brokers and legal advisers is to maintain run-off cover for a minimum of six to seven years after ceasing practice. This aligns with the standard limitation period for claims under both tort law and breach of contract in most Australian jurisdictions -- typically six years from the date the cause of action arose.

A seven-year period is often recommended to provide a safety buffer and to account for situations where the limitation period may be extended -- for example, where a client was not aware of the loss until some time after it occurred. Some professions and contractual arrangements may require longer periods, and your insurance broker can advise on the appropriate duration for your specific circumstances.

Key Considerations When Arranging Run-Off Cover

Arranging run-off cover is not simply a matter of contacting your existing insurer and asking them to extend your policy. There are several important factors to consider, and the decisions you make at this stage can have significant financial consequences.

• Timing of the transition -- Run-off cover should be arranged before your active policy lapses. A gap in coverage -- even a brief one -- can create uncertainty about which policy responds to a claim that straddles the transition period.
• Insurer availability -- Many insurers will only provide run-off cover to professionals who have been their clients for a period of time. If you are considering changing insurers in the years before retirement, be aware that this may affect your ability to obtain run-off cover from your preferred insurer.
• Single-premium multi-year policies -- Some insurers offer a single upfront premium that covers the entire run-off period (typically six or seven years). This can be more cost-effective than annual renewals and protects against future premium increases. Your broker can compare this option against annual renewal costs.
• Contractual obligations -- Some professional service agreements, government contracts, or industry codes require professionals to maintain PI insurance for a specified period after the engagement ends. Review your contracts carefully before allowing your coverage to lapse.
• Business sale arrangements -- When selling a professional practice, the responsibility for run-off insurance should be clearly defined in the sale agreement. Sellers should not assume that the buyer''s policy will cover claims arising from the seller''s period of ownership.
• Tax deductibility -- Run-off insurance premiums are generally considered tax-deductible business expenses by the ATO, as they relate to the income-earning activities of the previous business. Your accountant can confirm the deductibility in your specific circumstances.

Common Mistakes and Red Flags

The transition from active practice to retirement or business closure is a busy and often stressful time. Insurance decisions can be overlooked or deferred, with potentially serious consequences. The following mistakes are among the most common -- and most costly.

• Allowing the active policy to lapse without arranging run-off cover -- This is the most serious error. Once the active policy lapses, you may find it difficult or impossible to obtain retrospective coverage, and any claims made after the lapse date will be uninsured.
• Assuming the statute of limitations protects you -- While limitation periods do eventually extinguish claims, they are subject to exceptions and can be extended in certain circumstances. Relying on the limitation period as a substitute for insurance is a high-risk strategy.
• Underestimating the cost of uninsured claims -- Professional indemnity claims can be expensive to defend, even when the professional is ultimately found not liable. Legal costs alone can run to tens or hundreds of thousands of dollars.
• Failing to notify the insurer of known circumstances -- If you are aware of a potential claim or complaint at the time you transition to run-off cover, you must notify your insurer. Failure to do so may result in the claim being excluded from the run-off policy.
• Choosing the cheapest option without understanding the coverage -- Run-off policies vary in their terms, conditions, and exclusions. An insurance broker can help you compare policies on a like-for-like basis and identify any gaps in coverage.
• Not reviewing the retroactive date -- The retroactive date on a claims-made policy determines how far back in time the policy will respond. Ensure your run-off policy has a retroactive date that covers your entire period of practice.

Australian Regulatory Context

Professional indemnity insurance requirements in Australia vary by profession and are governed by a combination of legislation, licensing conditions, and industry codes. Many regulated professions are required by law or licensing conditions to maintain PI insurance -- and in some cases, run-off cover -- as a condition of their registration or licence.

The Australian Securities and Investments Commission (ASIC) requires Australian Financial Services Licence (AFSL) holders and credit licensees to maintain adequate PI insurance as a condition of their licence. ASIC''s Regulatory Guide 126 (RG 126) sets out the minimum requirements for PI insurance for financial services licensees, including requirements that may extend to run-off cover in certain circumstances.

The Tax Practitioners Board (TPB) requires registered tax agents, BAS agents, and tax financial advisers to maintain PI insurance as a condition of registration. The TPB''s PI insurance requirements include provisions relating to run-off cover for practitioners who cease to be registered.

The Australian Health Practitioner Regulation Agency (AHPRA) requires registered health practitioners to maintain appropriate PI insurance, and many health professions have specific run-off cover requirements. Medical practitioners may be eligible for the government-funded Run-off Cover Scheme (ROCS) upon retirement, which provides a government-backed alternative to commercial run-off insurance.

Insurance brokers in Australia must hold an AFSL or operate as an authorised representative under an AFSL holder. They are regulated by ASIC and must comply with the best interests duty and other obligations under the Corporations Act 2001. The National Insurance Brokers Association (NIBA) Code of Practice sets additional professional standards for member brokers.

Questions to Ask Your Insurance Broker About Run-Off Cover

If you are approaching retirement, selling your practice, or winding up your business, the following questions will help you have a productive conversation with your insurance broker about run-off cover.

1. What is the retroactive date on my current PI policy, and will the run-off policy maintain the same retroactive date?
2. Which insurers on your panel offer run-off cover for my profession, and what are the key differences between their policies?
3. Is a single-premium multi-year policy available, and how does the cost compare to annual renewals over the recommended run-off period?
4. Are there any known circumstances or potential claims I should notify to my current insurer before transitioning to run-off cover?
5. Do any of my professional contracts or licensing conditions require me to maintain PI insurance for a specific period after ceasing practice?
6. What is the claims process under the run-off policy, and who should I contact if a claim is made against me after I retire?
7. Are the run-off premiums tax-deductible, and can you provide documentation to support this for my accountant?

How MyMoney Can Help

Arranging professional indemnity run-off cover is a specialised task that requires an insurance broker who understands the claims-made policy structure, the run-off market, and the specific requirements of your profession. Getting this wrong can leave you personally exposed to claims that could have been covered.

MyMoney connects Australian professionals with experienced insurance brokers who specialise in professional indemnity and run-off cover. Our marketplace makes it easy to compare brokers, review their credentials, and find a professional who can guide you through the transition from active practice to retirement or business closure.

Post a Brief on MyMoney to describe your run-off cover needs and receive proposals from qualified insurance brokers. Or Browse Insurance Brokers on MyMoney to find a specialist in professional indemnity and run-off cover.

This article provides general information only and does not constitute insurance or financial advice. Professional indemnity and run-off cover decisions should be made in consultation with a licensed insurance broker who can assess your specific professional circumstances and obligations.