Alright, mate. Listen up.

You’ve spent years building your trade business. Late nights, early mornings, chasing payments, dealing with difficult clients, and making sure your tools don’t walk off the job site. You’ve finally decided it’s time to hang up the tools, sell the business, or maybe just shut the doors for good. Good on you. But before you crack that cold one and celebrate, there’s one job you can’t afford to rush: sorting out your insurance.

Most tradies think insurance ends the day they stop working. That’s a bloody expensive mistake. You might be surprised to learn that your liability doesn’t vanish just because you’ve sold the ute or handed over the keys to the workshop. I’ve seen blokes get sued six months after selling their business for a job they did two years earlier. Without the right cover, that’s a personal financial disaster.

So, let’s have a yarn about what you actually need to do with your insurance when you’re closing or selling your trade business. I’ll walk you through it like I’m explaining it to a mate over a coffee at the site shed.

Why Your Insurance Doesn’t End When You Do

Here’s the thing most blokes get wrong: your insurance isn’t a subscription you just cancel when you’re done. It’s a safety net that has to cover you for work you already did. Think of it like this – if you fixed a roof in 2024 and it leaks in 2026, the new owner or the client could still come after you.

This is what we call the “claims tail.” In Australia, the statute of limitations for property damage and personal injury claims varies by state, but it’s generally between 3 and 6 years. In some cases, like in New South Wales or Victoria, it can stretch longer for latent defects (stuff that wasn’t obvious straight away). That means you need insurance that stays active long after your business name is off the ABN register.

The Two Main Risks You Still Face

When you close or sell, you’re not just walking away. You’re walking away with potential liabilities still attached to your name.

  • Claims from past work: A client finds a fault, or someone gets hurt because of something you did. Even if you sold the business “as is,” the new owner isn’t liable for your past mistakes. You are.
  • Claims during the transition: If you’re selling, there’s a handover period. What if an employee gets injured during the final week? What if a tool you sold with the business causes an accident? You need cover for that messy middle period.

The golden rule is simple: Never cancel your insurance until you are absolutely certain you have a run-off policy in place. We’ll get to what that looks like in a minute.

The Two Paths: Closing Down vs. Selling Your Business

What you do with your insurance depends entirely on how you’re exiting the game. Are you just shutting the doors, or are you passing the torch to someone else?

Closing Down Your Trade Business

If you’re closing down – cancelling your ABN, selling off your assets, and walking away – your main job is to protect yourself from the past. You don’t need cover for future work because you aren’t doing any. But you do need a special type of policy.

This is where Run-Off Insurance comes in.

Run-off insurance is basically a time machine. It covers you for claims that are made after your business closes, but are based on work you did before it closed. It’s not cheap to buy as a one-off, but it’s a hell of a lot cheaper than fighting a lawsuit out of your own pocket.

  • What it covers: Claims for faulty workmanship, injury, or property damage from jobs you completed while you were trading.
  • How long you need it: As I mentioned, you’re looking at a minimum of 3 years. For high-risk trades (like electrical, plumbing, or structural work), I’d recommend 6 or even 7 years. Check your state’s laws. In Queensland and Western Australia, the time limits can be a bit different, so have a chat with a broker who knows your state.
  • What it costs: You’ll typically pay a single premium upfront. Depending on your trade, turnover, and claims history, expect to pay anywhere from $1,500 to $6,000 for a 6-year run-off policy. It sounds like a lot, but compare it to the cost of a single lawsuit. It’s a no-brainer.

You also need to think about Statutory Workers Compensation. In every Australian state and territory, you cannot just cancel this policy. You must formally close your workers compensation policy with the relevant state authority (like WorkCover in NSW or WorkSafe in Victoria). You need to lodge a final return and pay any outstanding premiums. If you don’t, you could be personally liable for any future claim from a past employee, even if you’ve shut down.

Selling Your Trade Business

Selling is a bit different. You’re handing the reins over to someone else. But that doesn’t mean you’re off the hook for your past.

When you sell, you have two main options:

  1. Transfer the policies to the new owner. Some insurers allow this, especially if the new owner is taking over the legal entity (like a company). But this is rare. Most insurers will want to write a new policy for the new owner.
  2. Buy a run-off policy for yourself. This is the standard approach. You cancel your existing policies on the sale date and buy a run-off policy to cover your past work.

Crucial tip: Do not just “leave” your public liability insurance in place for the new owner. If the new owner has an accident, your policy won’t cover them. And if they have an accident that relates to something you did, your policy might fight them for it. It creates a mess.

You also need to check your Professional Indemnity Insurance. If you provided any design or advice services, this is critical. Run-off for professional indemnity is often more expensive because the risk of a claim is higher and the time limits can be longer.

Finally, if you’re selling the business as a going concern, you might need Business Interruption Insurance for the transition period, or Cyber Insurance if you’re handing over client databases. Talk to your insurer about a specific handover clause or a short-term extension.

What About Your Specific Insurance Policies?

Let’s break down the main types of insurance and what you do with each when you’re closing or selling.

Public Liability Insurance

This is the big one. This covers you if a client or a member of the public is injured or their property is damaged because of your work.

  • When closing: Cancel it on your last day of work. Immediately buy a run-off policy.
  • When selling: Cancel it on the day of settlement. Buy a run-off policy for yourself. Do not transfer it.

Premium range: Most tradies pay between $800 and $2,500 per year for public liability, depending on your trade and turnover. A run-off policy for 6 years will typically cost 2-3 times your annual premium.

Tool and Equipment Insurance

This covers your gear against theft, loss, or damage. Once you sell your tools or stop using them, you don’t need this.

  • When closing: Cancel it the day you sell or dispose of your last tool.
  • When selling: Cancel it on settlement day. The new owner buys their own.

Watch out: If you’re storing tools in a shed or garage while you try to sell them privately, check if your home contents insurance covers them. Often, it won’t cover business tools. You might need a short-term storage policy.

Income Protection / Business Expenses Insurance

This covers you if you can’t work due to illness or injury.

  • When closing: Cancel it when you stop trading. You don’t need it if you’re not earning business income.
  • When selling: Cancel it on settlement. But, if you’re starting a new job or another business, you should look at a personal income protection policy, not a business one.

Workers Compensation

This is a legal requirement in every state. You cannot simply cancel it.

  • When closing: You must lodge a final wage return and formally close the policy with your state’s workers compensation authority. This usually involves proving you have no outstanding wages.
  • When selling: Same process. The new owner starts their own policy. You close yours.

State-specific note: In New South Wales, the workers compensation system is managed by icare. In Victoria, it’s WorkSafe. In Queensland, it’s WorkCover Queensland. Each has a specific process for closing a policy. Don’t just stop paying the bill – that will land you in hot water.

The Paperwork You Need to Keep

This is the part most tradies hate, but it’s the most important. When you close or sell, you are creating a legal record.

Keep every single document related to your insurance for at least 7 years.

What you need to keep:

  • Your insurance policies: The full policy documents, not just the certificate of currency.
  • Your run-off insurance policy: This is your lifeline.
  • Your final workers compensation return: Proof you closed the policy correctly.
  • Records of all jobs: Invoices, contracts, photos, emails. Anything that shows what work you did and when.
  • Correspondence with your insurer: Emails, letters, notes from phone calls.

Why? Because if a claim comes in 5 years from now, you need to prove you had cover at the time. If you’ve lost the paperwork, the insurer might deny the claim. And if you don’t have a run-off policy, you’ll be paying the legal fees yourself.

I know a sparky from Adelaide who sold his business in 2020. In 2024, a fire was traced back to a job he did in 2018. Because he kept his records and had a run-off policy, his insurer handled it. Cost him his excess and a bit of stress. Without it, he’d have been looking at a $50,000 legal bill minimum.

How to Buy the Right Run-Off Policy

You can’t just buy any old policy. You need one specifically designed for run-off. Here’s how to do it properly.

  1. Talk to your current insurer first. They might offer a run-off extension. It’s often the easiest option because they already know your history.
  2. Get a few quotes. The insurance market has changed a lot since 2020. Premiums have gone up. Platforms like BizCover let you compare quotes from multiple insurers for run-off cover, which saves you ringing around a dozen different companies. Just make sure you’re comparing like-for-like – check the policy wordings.
  3. Be honest about your trade. A plumber doing domestic work has a different risk profile than a plumber doing high-rise commercial work. The latter will pay more for run-off.
  4. Check the excess. Some run-off policies have a high excess ($2,000-$5,000). Make sure you can afford it if a claim happens.
  5. Read the fine print on “claims made.” Most public liability and professional indemnity policies are “claims made” policies. This means the insurer only covers you if the claim is made while the policy is active. A run-off policy keeps that window open for a set number of years.

What about cost in 2026? Based on current trends, a 6-year run-off policy for a typical sole trader (plumber, electrician, carpenter) with a turnover under $200k is likely to cost between $1,800 and $4,500. For a larger business or a higher-risk trade (like demolition or scaffolding), it could be $5,000 to $10,000+. It’s a one-off cost, but it’s non-negotiable.

Common Mistakes Tradies Make (And How to Avoid Them)

I’ve seen it all over the years. Here are the biggest stuff-ups tradies make when closing or selling.

  • Cancelling insurance too early. You cancel your policy on the day you finish your last job. Then a client finds a problem from a job you did three months ago. Now you have no cover. Solution: Only cancel when the run-off policy is active.
  • Thinking the new owner’s insurance covers you. It doesn’t. Their policy covers their work, not yours.
  • Forgetting about workers compensation. You close the business but don’t do the final paperwork. An old employee makes a claim. You’re personally liable. Solution: Lodge the final return and get confirmation in writing.
  • Not keeping records. You throw away your old job files. A claim comes in. You can’t prove you did the work or that you had insurance. Solution: Digitise everything and store it in the cloud.
  • Buying the cheapest run-off policy. You find a policy for $800. It has a $10,000 excess and excludes latent defects. It’s basically worthless. Solution: Pay for quality cover. It’s an investment in your peace of mind.

FAQ: Insurance When Closing or Selling Your Trade Business

How long do I need to keep my insurance after closing my business?

You need run-off insurance for at least 3 to 6 years, depending on your state and trade. For high-risk trades like electrical or structural work, I’d recommend 7 years. Check the statute of limitations in your state – in NSW and VIC, it’s often 6 years for contract claims.

Can I just cancel my public liability insurance when I sell my business?

No. You should cancel it on the day of sale, but you must immediately replace it with a run-off policy that covers your past work. If you just cancel it, you have no cover for any future claims related to jobs you did before the sale.

What is run-off insurance?

It’s a specialised policy that covers you for claims made after your business has closed or been sold, but which relate to work you completed while the business was active. It effectively extends the “claims window” for your past work.

Does the new owner of my business need their own insurance?

Absolutely. The new owner needs their own public liability, workers compensation, and tool insurance. Your policies do not transfer to them. They are a separate legal entity.

What happens if I don’t buy run-off insurance and a claim comes in?

You will be personally liable for all legal costs and any damages awarded. This can easily run into tens or hundreds of thousands of dollars. It could wipe out your retirement savings or force you to sell your house.

How do I close my workers compensation policy?

You must contact your state’s workers compensation authority (e.g., WorkCover NSW, WorkSafe VIC, WorkCover QLD). You need to lodge a final wage return, pay any outstanding premiums, and formally request the policy be closed. Get written confirmation of the closure.

Is run-off insurance tax deductible?

Yes, in most cases. Because it’s a cost incurred in closing your business, it is generally a deductible business expense. Talk to your accountant to be sure, but it’s standard practice.

Can I use a comparison site to find run-off insurance?

Yes. Platforms like BizCover allow you to compare run-off policies from different insurers. It’s a good way to see the range of premiums and cover options available. Just make sure you read the product disclosure statement (PDS) carefully before you buy.