insurance for theseller’s promises.

Reps and warranties insurance pays the buyer if the seller’s statements in the purchase agreement turn out to be wrong, such as misstated financials or undisclosed liabilities. Instead of claiming against the seller or an escrow, the buyer claims against the policy. Most policies are bought by the buyer and bind at signing or closing.

It covers losses from breaches of the seller’s representations that nobody knew about at signing. Common examples are financial statements, material contracts, compliance with laws, pre-close taxes, employment matters and intellectual property. General reps are typically covered for three years and fundamental and tax reps for six.

Typically anything found in diligence or disclosed before signing, purchase price adjustments, earnouts, forward-looking projections, covenant breaches and pension underfunding. Environmental and some industry-specific risks are often excluded or limited. That’s why thorough diligence matters: known issues get handled in the purchase agreement, not the policy.

It depends on the deal size, the limit you buy, the target’s industry and the market when you bind. Expect a premium priced as a share of the policy limit, an underwriting fee and surplus lines taxes, all paid up front. We’ll price it for your deal before you commit.

The retention works like a deductible: the loss the buyer absorbs before the policy pays. It’s usually set as a share of enterprise value and often drops after the first year. Buyers and sellers commonly split it, with the seller covering part through a small escrow.

It depends on the deal. Below a certain size, the minimum premium and fees can cost more than a seller escrow, while mid-market deals increasingly use it. Carriers set their own minimum deal sizes, so the answer moves with the market. We’ll give you a straight answer for yours.

It can reduce or replace much of it. With R&W insurance, the buyer claims against the policy instead of the seller, so sellers often accept a smaller escrow or none at all. On smaller deals, the premium and retention can cost more than an escrow, so compare both.

On a clean deal, often one to two weeks from choosing an underwriter to a bound policy. It moves faster when diligence reports are ready, since underwriters rely on them. Starting at or soon after the LOI leaves room to compare quotes and negotiate terms before signing.

Buy-side policies, the large majority in the US, cover the buyer directly, so the buyer claims against the insurer. Sell-side policies cover the seller against claims the buyer brings. Buy-side is usually preferred because the buyer controls the claim and doesn’t need to pursue the seller first.

The buyer gives the insurer notice of a possible breach, documents the loss, and the insurer reviews it against the policy terms and retention. Many claims arrive well after closing, so early notice and good records matter most.

Start with the target’s operations, transaction structure and value, intended policy limit, purchase agreement, available diligence, and signing and closing dates. Ask the specialist to confirm insurer appetite, underwriting requirements, exclusions, fees, and total cost. A preliminary discussion is not an insurer’s offer or evidence that coverage is bound.

No. R&W addresses covered breaches of the insured representations under its own terms. Review the acquired business’s operating policies separately, including acquisition clauses, historical reporting, workers’ comp ownership treatment, and required insurer confirmations. Neither review replaces the other.