Reps & Warranties: Insurance
Essential Question:
Is there a reason that the cost of insuring this business may be higher or impossible in the future?
In Brief:
Insurance policies for the business and their details.
History of claims and outcomes.
Conditions and terms of policies.
Category: Continued Diligence & Fact-Finding; Risk Allocation
What is it?
First, it’s an explanation of policies you have, how long they’ve been in place, premiums, deductibles, underwriters, etc. Then, it’s a discussion of the history and condition of those policies. What is your claims history? Are all policies in good force and effect? Have you ever been denied insurance? Workers’ compensation issues may show up here or under Labor and Employment: What’s your history, potential dangers within the workplace, and workers comp ratings?
When does it matter?
Even if the Buyer does not plan on continuing the insurance policies purchased by the Seller, the information is useful for determining the appropriate level of insurance protection.
What to look out for?
Be on the lookout for subjective language such as whether the insurance coverage used in the past is “sufficient.”
