Coverage Overview

The Basics:

Who’s Insured:

Policies can cover either the buyer or seller although with increasing frequency, buyers are becoming the more common insured. This allows the sellers to “walk away” from the transaction post-close and allows the buyer directly access the insurers in the event of a claim.

What’s Covered:

The policies aim to cover all of the reps and warranties made by the Seller in the Purchase & Sale Agreement.

What’s Not Covered:

The policies do not cover covenants, known or disclosed matters or existing liabilities (including underfunded pension plans). Environmental coverage is generally limited to compliance and regulatory matters. Environmentally sensitive operations need to have robust environmental programs in place to cover contamination/clean-up exposure.


~$500 million for any given transaction.


1% to 2% of the deal size.


2.5% to 4.5% of the limit purchased.

Due diligence fee:

~$20,000 to $45,000.

Policy period:

Will align with the Acquisition Agreement, but can be tailored (under a buyer based policy) to meet the needs of the insured. Typically, General Reps are covered for 18 months to 36 months while Fundamental Reps are covered up to six years.

Underwriting time:

Two to three weeks is comfortable. Deals have been done in as little as a couple days, but that isn’t a pleasant experience for anyone.