Glossary

Representations and warranties insurance

Insurance for a business sale that pays the buyer's loss if the seller's statements about the company in the purchase agreement prove untrue.

Also called: R&W insurance, RWI, warranty and indemnity insurance, W&I insurance, deal insurance

In an acquisition, the seller makes representations and warranties in the purchase agreement: the financial statements are accurate, taxes are paid, no litigation is undisclosed. Representations and warranties insurance covers the buyer if those statements prove false, so the buyer can recover from an insurer instead of chasing the seller. Most policies are buy-side. The insurer pays the buyer and can pursue the seller only for fraud, which lets sellers, especially private equity sellers, leave less money in escrow.

Gallagher's 2026 data put typical limits at about 10% of enterprise value, with pricing near 3% rate on line. Underwriters review the buyer's diligence reports first, then set exclusions: matters the deal team knew about, purchase-price adjustments, and often items such as underfunded pensions or asbestos. A retention applies before the insurer pays, and general representations commonly survive three years, with fundamental and tax representations surviving six. Aon's 2026 claims study found more than $440 million in recoveries in 2025, and about 18% of 2019-2023 policies had a claim notification.

The pitfall is knowledge. Anything the deal team knew about before signing is excluded, and thin diligence produces broad exclusions. Treat the policy as protection for unknown problems, not a substitute for investigating known ones. The guide on Representations and warranties insurance in M&A deals walks through underwriting and claims, and the rate on line entry explains the pricing measure.

Last reviewed October 10, 2026

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Related terms

Retention The share of a loss a business pays itself, through a deductible, self-insured retention or captive, before insurance responds. Rate on line The premium for a layer of reinsurance or excess coverage divided by that layer's limit, showing the price paid for each dollar of protection. Exclusion A policy provision that removes coverage for specified perils, property, people or types of loss that the insuring agreement would otherwise include. Indemnity The principle that insurance restores your financial position after a loss, no better and no worse; also a contract promise to make good another's loss. Claims-made policy A liability policy that covers claims first made against you and reported to the insurer during the policy period, whenever the underlying act occurred.

Related guides

How to prepare an insurance submission underwriters will read What goes into a commercial insurance submission: ACORD forms, loss runs, exposure data, a risk narrative and supplements, with a checklist and common mistakes. Insurance due diligence when buying a business What to review in a target's insurance before closing: loss runs, claims-made tails, workers' comp mod, policy assignment, R&W insurance and day-one program. D&O insurance for private companies and startups Private companies face D&O claims from investors, co-owners, creditors and regulators. How private policies differ from public ones and what startups need. Representations and warranties insurance in M&A deals How buy-side R&W insurance works in an acquisition: limits, retention, policy periods, exclusions, underwriting steps and what Aon's 2026 claims data shows. Tax insurance in deals: what transactional tax policies cover Tax insurance pays extra tax, interest, penalties and defense costs if a tax authority defeats a position taken in a deal. How it works, costs and how to buy.

Related insurers

Berkshire Hathaway Specialty Insurance Berkshire Hathaway's Boston-based specialty arm, launched in 2013: property, casualty, D&O, E&O, healthcare liability, surety and marine through brokers.