Written by William Paull
Co-Founder & Account Director
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Key points
- Before you switch, ask what date the new policy goes back to.
- Sitting on a problem job instead of telling your insurer can cost you the claim.
- Before you cancel the policy on the day you stop trading, arrange run-off.
Why doesn't the policy you had when you did the work pay?
Because it is claims-made. A client's claim can come next month or five years from now, and against you personally. Unless you notified the problem while the old policy was running, what matters is whether today's policy answers for that job.
Three moments catch people out: switching insurers, sitting on a problem, and stopping work.
Public liability runs on a different clock, as public liability and professional indemnity: do you need both? explains.
What happens to your retroactive date when you switch insurers?
It can reset, and that is where a cheaper quote bites.
The retroactive date is the earliest date your current policy will go back to. If it matches your first day in practice, your whole career is covered. If the new insurer's date resets to the day the policy started, every earlier job has no cover, even though you paid premiums for it at the time.
A quote that looks 20% cheaper is not a saving if the date resets to today. Ask what date the policy goes back to, and whether it matches what you already had.
What we check: your retroactive date against your actual practice history, not just the policy you are replacing. A gap two insurers back can still be sitting there unnoticed.
What if you already know about a problem job?
Tell your insurer in writing as soon as you know, even if nobody has formally complained yet. Wait until renewal and you may have lost the right to claim on it at all. In our experience, sitting on a problem is by far the biggest and most costly mistake small business owners make with this cover.
Under section 40(3) of the Insurance Contracts Act 1984 (Cth), written notice of facts that might become a claim, given before the policy expires, can lock in cover for a claim that arrives later. A complaint, an unhappy email or a mistake you spotted yourself all count. Miss that window and the protection is gone. The NSW Court of Appeal confirmed in 2003 that section 54 of the Act cannot excuse a missed section 40(3) notification.
Switching makes it worse. A new insurer can decline a claim from a fact, incident or complaint you knew about before its policy started, as a known circumstance, even if the work falls inside your retroactive date. A continuous cover clause can still pick up a problem you knew about but never notified. On seven of the nine professional indemnity wordings we compared, it only works if the same insurer covered you throughout.
What we check: that continuous cover clause, before you move.
Do you need run-off cover when you retire, sell or close?
Yes, if you want your past work protected. Retire, sell the business, wind up a company or move into a different line of work, and your exposure to claims about past work does not end when you cancel the policy on your last day. Without run-off, a claim about a job from three years ago has nothing to respond to it.
Run-off is generally arranged for 12 months, 3 years or 7 years. As a general indication, 12 months costs about the same as your last year's renewal premium, and 7 years roughly 2.5 times it. Treat that as a rule of thumb to plan around, not a quote.
If you belong to CPA Australia, CA ANZ or the Institute of Public Accountants, your body requires at least seven years of run-off after you stop practising or retire, or your practice merges, as professional indemnity for accountants sets out.
What we check: whether you need run-off. We raise it when you take on a partner, change your business structure or start talking about winding down, not after the policy has lapsed.
About to switch insurers or stop work?
Tell us when you started practising. We check how far back your cover reaches before anything is cancelled.
Frequently asked questions
Is a cheaper professional indemnity quote worth switching for?
Not if it reaches back less far than your current policy. Consolidated Insurance Brokers checks the retroactive date before you switch, because a new policy can reset it to the day it starts. If it does, every earlier job sits outside your cover. A lower premium saves nothing if it leaves your past work uninsured.
How long does professional indemnity run-off cover last, and what does it cost?
Usually 12 months, 3 years or 7 years. Consolidated Insurance Brokers raises run-off before you stop, not after the policy lapses. Plan on 12 months costing about the same as your last renewal premium, and 7 years about two and a half times that. That is a general indication, never a quote.
When should I tell my insurer about an unhappy client?
Straight away, in writing. At Consolidated Insurance Brokers, we see sitting on a problem as the mistake that costs people most with professional indemnity, and waiting until renewal can lose you the right to claim. Give that notice while the policy is still running and that policy can still answer a claim that arrives later. Wait until it lapses and the protection is gone.
Does public liability need run-off cover when I close my business?
Usually not. Consolidated Insurance Brokers arranges both covers, and they run on different clocks. Public liability is occurrence-based on most wordings, so the policy in force when the incident happened responds, even if the claim comes years later, and no separate run-off is required. Professional indemnity is claims-made, which is why it is the cover that needs run-off when you stop.