Do I need insurance after I close my business?

If you provide professional services and are closing or selling your business, you should consider taking out run-off insurance to protect against claims made up to six years post-sale. Some professional bodies and associations will also require you to have run-off cover. Similarly, if you provide products, you should consider appropriate run-off insurance. Run-off insurance is provided on a ‘claims made’ basis, so insurance must be in place when a claim is made, not when the error arose. A Sale & Purchase agreement will likely make the seller responsible for any losses relating to pre-sale activities. Run-off insurance protects the seller against losses/liabilities. In addition, run-off insurance considerations should be applied to Directors & Officers Liability insurance. Once a sale is concluded, this policy automatically goes into ‘run-off’ and is also on a ‘claims made’ basis. The liabilities covered by a D&O policy will not necessarily be the same as those contained within a Sale & Purchase agreement and can’t always be covered under a W&I insurance policy. Any run-off policy should be taken out for six years post-sale to coincide with possible tax liabilities.

What is indemnity insurance for the sale of a business?

When selling a business, you will make certain warranties and indemnities upon which the agreed sale/purchase price will be based. These might be about the accounts and financial information, intellectual property, or ongoing legal disputes. Warranty and indemnity insurance protects the seller from claims if the buyer alleges any of the information provided was incorrect, consequently impacting the amount paid.

What is an indemnity from the business seller?

An indemnity is an agreement the seller makes with the buyer to reimburse the buyer for certain types of agreed losses. For example, if there is an employee tribunal claim against your business that isn’t resolved before the sale, the seller may agree to reimburse any compensation the business must pay when the claim is resolved post-sale. Warranty and indemnity insurance would protect the seller from this cost.

Who takes our warranty and indemnity insurance?

Either party, but generally, the seller takes out and pays the premium for warranty and indemnity insurance.

What insurance do I need when selling my business

Insurance considerations when selling your business

There are more than 5.5 million privately owned businesses in the UK, employing around 82% of the working population. If you’re one of those business owners, selling up is something you’re likely to consider at some point, but where to start?

30.04.25

By Alan Boswell Group

To give you an idea of what you’ll need to think about, we look at how to sell your business in the UK, including the key insurance considerations to protect yourself during and after the sale.

Understanding when to sell your business

Timing when to sell your business is hugely important. This is especially true if your business is seasonal, and you want to handover before its next peak.

If you’ve decided to sell up, it’s likely for numerous reasons, and only you (and your business partner, if you have one) will know when the time is right.

When is the right time to sell?

Here are some common examples of when might be the right time to sell your business.

Rising profits and performance – selling while your company’s still growing can help you secure the best value and encourage a faster sale.

Declining performance – selling on a downward turn might feel like a poor decision, but there’ll be buyers keen for a challenge and an opportunity to build on something that already has the groundwork in place. Remember that selling a business in decline will be reflected in its value and asking price.

Your priorities have changed – it could be time to sell if you’re looking ahead to retirement, need a cash lump sum, or your business no longer gives you the excitement or level of challenge you want.

Your business needs taking to the next level – you may be at the point where you lack the skills to grow it further. If this is the case, you may feel that handing it over to a new owner will improve the company’s trajectory.

Competitor purchase – you may be approached by a competitor who has asked to buy your business.

Market landscape – the market you’re in may have reached saturation point, and you may not feel your business is viable anymore.

Preparing your business for sale

Once you’ve decided to sell, preparing your business properly can help ensure a smooth transition. Considerations include:

Contracts – all contracts should be up to date (both for employees and clients) so that new owners know what terms are in place.
Reviewing and updating accounts – all your accounts should be in order; this could mean you need to professionally audit your business so potential buyers have a clear picture of its financial health.
Reviewing your expenses – now is a good time to review any business expenses and streamline them where you can; this could include subscriptions to services you rarely use.
Securing non-tangible assets – you can protect your assets with intellectual property insurance, securing your business’ point of difference and boosting its value. However, it is recommended that intellectual property insurance be taken out well before any proposed sale. Taking this policy out at the time of sale might be viewed by insurers as a ‘selection against/distressed purchase’ transaction. Having this policy in place in advance benefits the buyer and is likely to be reflected in the purchase price offered.
Updating policies and processes – chances are processes, policies, and roles will have evolved since you started your business; it’s a good time to review this and set out clear policies on broader staff issues, for example, recruitment, redundancy, maternity and paternity leave, and codes of conduct.
Preparing teams – if you employ staff, it’s sensible to keep them in the loop; selling a business with happy and engaged staff gives the whole organisation an advantage.

Insurance considerations when selling your business

While preparing your business for sale, it’s also a good idea to consider what insurance you might need. Selling a business comes with risks, but insurance can help mitigate them. Consider:

Warranty and Indemnity (W&I) Insurance

W&I insurance protects sellers against potential legal claims from buyers who believe that the Sale & Purchase Agreement about the business was misleading, and this has caused them financial loss. For example, it covers:

Breaches of warranties in the sale agreement.
Misrepresentation of financial accounts, employee matters, or intellectual property rights.
Unforeseen liabilities discovered post-sale.

This insurance reassures buyers and sellers by transferring risk to an insurer rather than the seller personally bearing liability. For sellers, it can also mean quicker access to the sale funds, or if you intend to stay in the business post-sale, it can be particularly valuable in helping maintain relationships. W&I insurance can form part of the general transaction costs and, therefore, can be tax and cost-efficient.

Find out more in our guide to warranty & indemnity insurance.

Professional Indemnity Insurance

If your business provides professional services, maintaining professional indemnity insurance during and after the sale is advised to protect against any claims related to advice or services provided before the sale. With clients able to make a claim within six years, you should consider taking out run-off cover to protect against claims from clients post-sale. This type of insurance is known as ‘run-off’ cover.

Business Interruption Insurance

If your business is affected by an unexpected event pre-sale, business interruption insurance can help cover lost income. Buyers may request continuity of cover during the sale to protect operations.

Key Person Insurance

If your business heavily relies on a key individual (such as the owner or a director), key person insurance can provide financial security in case of unexpected absence due to illness or death, which may be a concern for potential buyers, especially if they are staying in the business post-sale.

The purchaser may also choose to continue with any pre-existing cover or take out a key person policy post-sale.

How long does it take to sell a business in the UK?

This often depends on circumstances, but on average, it can take between six and nine months. Depending on the complexity of the sale, the process can take a year or even more.

Factors which can affect the sale process include:

The industry or market you’re in.

The value of your business and its appeal to potential buyers.

How much preparation work you need to do before a sale.

Your business location and if it can be managed remotely or if buyers need to be local.

What do I need to do after I sell my business?

When you sell your business, you’ll need to let HMRC know. The steps you need to follow will depend on whether you’re a sole trader, a business partnership, or a limited company. You can find out more at GOV.UK.

Protecting yourself with insurance during a business sale

Selling a business is a significant step, and the right insurance policies can protect you from financial and legal risks. For expert advice on business insurance during and after the sale of your business, speak to our team

Speak to us: 01603 218000

Insurance considerations when selling your business

In this article

In this article

Understanding when to sell your business

When is the right time to sell?

Preparing your business for sale