What Is Representations and Warranties Insurance?

Representations and warranties insurance can cover a buyer’s or seller’s loss from inaccurate statements in a stock or asset purchase agreement. For a business sale, check who is insured, who can recover and how known issues are treated.

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What Does Representations and Warranties Insurance Cover?

If due diligence later uncovers an inaccurate statement in the sale agreement, the buyer and seller may look to the policy and their remaining contract protections. ^2,¹

Representations and warranties insurance can protect a buyer or seller from financial loss when a statement in a business purchase agreement is inaccurate. ^2,¹

Statements in the Sale Agreement

Representations and warranties are statements of fact about the business being sold; an indemnity is a separate promise to be responsible for another party’s loss if a described event occurs. ¹

Who Is Insured and Who Can Recover

Confirm whether the buyer or seller is insured, and ask who can recover under the policy and how that recovery interacts with claims against the seller. ^1,^2,³

Question	Why it matters in a stock purchase
Is the buyer or the seller insured?	The two structures answer different loss paths.
Who can recover under the policy?	Recovery is not automatic from the product label.
How does recovery interact with claims against the seller?	Remaining seller indemnity still belongs in the same conversation.

Who Needs Representations and Warranties Insurance?

Consider R&W when you're buying or selling a business through a stock or asset purchase. Review it alongside the purchase agreement, disclosures and due-diligence findings. ^2,^3,¹

Representations and Warranties Insurance Coverage Examples

What happened

An Inaccuracy Comes to Light After Closing

After buying a business, you discover that a statement in the purchase agreement was inaccurate.

How coverage may help

R&W may cover financial loss from an insured inaccuracy. The representations, disclosures and policy terms determine the scope and how recovery works alongside seller indemnity. ^2,^1,³

What happened

Diligence Finds a Problem Before Signing

Your team identifies a potential problem before signing the purchase agreement.

How coverage may help

Known issues can be treated differently from inaccuracies discovered later. Disclose the problem so the insurer can explain whether it is excluded or otherwise addressed. ^2,^1,³

How Do You Compare Representations and Warranties Insurance Coverage and Costs?

The Purchase Agreement and the Policy

Compare the representations in the purchase agreement and disclosure schedules with the statements the policy is intended to insure. ^2,¹

Limit, Retention and Duration

Compare the proposed limit and retention with the size of the deal and the remaining seller indemnity, and ask how long the policy runs after closing. ^2,¹

A deal may retain seller indemnity, escrow or other security even when insurance is purchased. Compare those protections with the policy's limit and retention. The insurance and purchase agreement need to work together; buying a policy doesn't itself remove the seller's remaining contractual obligations. ¹ ^2,¹

What Known Issues Should You Discuss?

Ask how the quote treats issues already known from due diligence or disclosure, as opposed to inaccuracies that were not known when the deal was signed. ^3,^1,²

Example issue	Question to ask
An accounting error that was not known at signing	Is this the kind of inaccuracy the quote is meant to address?
A tax exposure already flagged in diligence	How does the quote treat a known issue?
A dispute about the purchase price	Is this a representations and warranties question at all?

Other Deal Products

Tax, contingent-liability and other transaction products are separate from representations and warranties insurance; list each product in the quote rather than treating the package name as complete. ^2,^1,³

Ongoing Management Liability

Representations and warranties insurance is arranged around a specific transaction; it is a different discussion from the company’s ongoing directors and officers or management liability coverage. ^2,^1,⁴

What Do You Need for Representations and Warranties Insurance Quotes?

Prepare the draft purchase agreement and disclosure schedules, due-diligence reports, a description of the buyer, seller and transaction, and any issues already identified that should be discussed with the insurer. ^2,^3,¹

Deal Documents and Diligence

Prepare	Ask the broker
Purchase agreement and disclosure schedules	Which statements will the policy insure?
Due-diligence reports	Which issues were known before signing?
Buyer, seller and transaction details	Who will be insured, and who can recover under the policy?
Seller indemnity, escrow or other security	How do the limit and retention work alongside remaining seller protection?
Identified issues	How will the insurer treat each known issue?

^2,^3,¹ ^2,¹ ^1,^2,³ ^3,^1,²

Representations and Warranties Insurance: Key Terms in Plain English

Representation or Warranty

A statement of fact about the business being sold, made in the transaction agreement. ¹

Seller Indemnity

A separate promise by the seller to be responsible for a described loss; compare it with the policy and remaining escrow. ¹ ¹

Frequently Asked Questions About Representations and Warranties Insurance

Does R&W Replace Ongoing D&O Coverage?

No. R&W is arranged for a particular transaction. Ongoing D&O and management liability address the company's continuing operations and leadership. ^2,^1,⁴

Can R&W Cover Issues Found During Diligence?

Known issues need to be disclosed and checked against the quote. They can be treated differently from inaccuracies that were unknown at signing. ^3,^1,²

Does Representations and Warranties Insurance Protect the Buyer or the Seller?

The arrangement can be structured for either party. Confirm which party is insured, who can recover under the policy, and how an insurance recovery interacts with any claim against the seller. ^1,^2,³

Are Tax and Contingent Liability Insurance Included in R&W?

They are separate transaction products. Check which products the quote actually includes; a transaction-liability package name does not establish that tax or contingent-liability protection is included. ^2,^1,³

Which Insurance Providers Offer Representations and Warranties Insurance?

AIG
AIG Representations & Warranties Insurance
Beazley
Beazley offers representations and warranties insurance.
Berkshire Hathaway Specialty Insurance
BHSI lists Representations & Warranties Insurance within its Transactional Liability products.
CFC
CFC offers buyer-side and seller-side representations and warranties insurance.
Chubb
Chubb offers representations and warranties insurance within its offering for large US- and Canadian-based multinational companies.
Corgi
Corgi lists representations and warranties insurance for M&A buyers and sellers.
Coverdash
Coverdash arranges representations and warranties insurance for mergers and acquisitions.
Founder Shield
Founder Shield lists representations and warranties insurance for mergers and acquisitions.
Gallagher
Gallagher arranges representations and warranties insurance.
Heffernan Insurance Brokers
Heffernan arranges representations and warranties insurance.
HUB International
HUB International arranges representations and warranties insurance.
Liberty Mutual
A group brand spanning personal and commercial insurance businesses; its business unit pages describe small-commercial cover for small businesses and commercial, specialty, surety, and reinsurance solutions for mid-size and large businesses.
Lockton
Lockton arranges representations and warranties insurance.
Newfront
Newfront arranges representations and warranties insurance as part of its mergers-and-acquisitions transaction-liability services.
The Baldwin Group
The M&A practice says its team can negotiate and place representations-and-warranty policies.
USI Insurance Services
USI arranges representations and warranties insurance.