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What Is Reps and Warranties Insurance?

Last reviewed: November 2026 · Jurisdiction: United States (deal insurance; state contract and insurance law varies)

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# What Is Reps and Warranties Insurance (RWI)?

Reps and warranties insurance (RWI) is a policy bought for an M&A deal that pays for losses caused by a breach of the seller's representations and warranties — the statements of fact about the business in the purchase agreement. Most policies today are buy-side: the buyer is the insured and claims against the insurer rather than (or before) the seller. That lets the seller cut back, or sometimes eliminate, its post-closing indemnity and escrow, and gives the buyer coverage that can last longer than the agreement's survival periods. RWI covers *unknown* problems; matters the buyer already knows about, price adjustments and certain listed risks are excluded.

At a glance

Question	Short answer
What it covers	Loss from breaches of the seller's reps and warranties in the deal agreement
Who is usually insured	The buyer (buy-side policy); seller-side policies exist but are now uncommon
How it's bought	Through a specialty broker, with underwriting before signing
Policy type	Claims-made
Deductible	A single "retention" the buyer bears first; it often drops after 12 months and may be lower or zero for fundamental reps
Typical policy period	Commonly 3 years for general reps and 6 years for fundamental reps (per the sources below)
Main exclusions	Known matters, purchase-price adjustments, covenants and forward-looking statements, plus deal-specific and certain listed risks
Can the insurer sue the seller?	Usually only for the seller's fraud (limited subrogation)
Cost	Premium and fees vary by deal; get a broker quote

How reps and warranties insurance works

Broker engagement. The buyer hires a specialty RWI broker, who sends a submission describing the deal and the coverage sought.
Quotes. Insurers respond with non-binding indication letters (NBILs) that preview terms, pricing and proposed exclusions.
Underwriting. The chosen insurer reviews the buyer's due diligence reports and data-room materials, then holds an underwriting call with the buyer's deal team.
Negotiation and binding. The policy is negotiated alongside the purchase agreement and is usually bound at signing.
Arm's-length deal terms. Insurers expect the parties to negotiate the reps as if there were no insurance, and the seller to disclose known exceptions in the schedules.
Closing. In many insured deals the purchase agreement makes the policy the buyer's main source of recovery for rep breaches, with limited (sometimes no) seller indemnity.
Claims. If a covered breach surfaces, the buyer gives notice under the policy (and under the purchase agreement, if it also applies) within the deadlines each sets.

What RWI usually does not cover

Known matters. Anything the buyer's deal team actually knew about before the policy started, and issues disclosed in schedules or found in diligence.
Purchase-price adjustments. Working-capital and similar adjustments are handled by the deal, not the policy, to avoid double recovery.
Covenants and forward-looking statements. RWI insures statements of fact, not promises about future conduct or projections.
Interim breaches. Breaches that arise between signing and closing are often excluded unless extra coverage is bought.
Listed risks. Sources cite underfunded pensions, certain environmental matters (such as asbestos and PCBs), transfer pricing and net operating losses, among others.
Deal-specific exclusions. Risks the insurer flags at the quote stage or in underwriting.

Why buyers and sellers use it

For sellers: less money tied up in escrow after closing and, in some deals, a "clean walk-away" with little or no indemnity for rep breaches.

For buyers: a more competitive bid in an auction, longer coverage than a typical survival clause, and a claim against an insurer instead of a seller who may also be a continuing manager or partner.

The trade-offs: cost, the retention the buyer still bears, exclusions, and the need for diligence thorough enough to satisfy underwriters.

RWI and the purchase agreement

The purchase agreement and the policy must fit together. Check that the agreement's definitions of breach and loss, any materiality scrape, the seller's limited exposure (often tied to the retention), fraud carve-outs and notice requirements line up with the policy. Our reps and warranties claims guide explains survival periods, baskets, caps and escrow under Delaware law.

Checklist before you bind a policy

Engage a broker early (Gallagher suggests about a month before signing).
Make diligence reports complete; gaps can become exclusions.
Read how the policy defines "knowledge" and whose knowledge counts.
Ask whether interim-breach coverage is available and needed.
Map every policy exclusion to a seller indemnity, special indemnity or price term.
Confirm the retention and who bears it under the purchase agreement.
Calendar the notice deadlines in both the policy and the purchase agreement.

Frequently asked questions

What does reps and warranties insurance cover?
Losses from breaches of the seller's representations and warranties in an M&A purchase agreement, subject to the policy's retention, limit and exclusions.

Who buys RWI, the buyer or the seller?
Usually the buyer. Most policies today are buy-side, meaning the buyer is the insured and claims against the insurer.

Does RWI cover known issues?
No. Matters the buyer knew about, or that were disclosed or found in diligence, are generally excluded. Those are usually handled with a special indemnity or a price adjustment.

How long does RWI coverage last?
The sources we checked describe typical policy periods of three years for general reps and six years for fundamental reps; the actual term is set in each policy.

Can the insurer go after the seller?
Usually only if the seller committed fraud. RWI policies generally limit the insurer's subrogation rights against the seller to fraud.

Talk to an M&A or business attorney

Browse Business Law Attorneys and Corporate Law Attorneys on Haute Lawyer.

Featured: Glenn L. Udell of Brown, Udell, Pomerantz & Delrahim in Chicago represents business owners in real estate, corporate transactions and complex litigation. Natasha Belon, a Denver business and real estate attorney and founder of Lotus Law PLLC, advises entrepreneurs and investors on transactions.

Sources

Taft Stettinius & Hollister, "Representations and Warranties Insurance: Introduction and Policy Framework" — https://www.taftlaw.com/news-events/law-bulletins/representations-and-warranties-insurance-introduction-and-policy-framework/ (process, NBIL, underwriting call, claims-made, buy-side, exclusions, subrogation; checked Nov. 11, 2026)
Gallagher, "Representations and Warranties Insurance" (2026 guide, PDF) — https://www.ajg.com/-/media/files/gallagher/us/industries/ggb-2026-representations-and-warranties-insurance.pdf (policy features, retention structure, policy period; checked Nov. 11, 2026)
Koley Jessen, "Reps and Warranties Insurance vs. Traditional Indemnity" — https://www.koleyjessen.com/insights/publications/reps-and-warranties-insurance-vs-traditional-indemnity-a-comprehensive-guide (buy-side, policy periods, exclusions; checked Nov. 11, 2026)
McDonald Hopkins, "Representation and warranty insurance 101" — https://www.mcdonaldhopkins.com/insights/news/Representation-and-warranty-insurance-101 (covenant and known-matter exclusions, policy period; checked Nov. 11, 2026)

*This article is general information, not legal or insurance advice.*

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