The buyer is requiring us to purchase a Sell-Side Representation and Warranty Insurance policy, but they want us to bear the entire deductible and premium. How do we structure the deal to split these transactional costs and limit our post-closing survival exposure?

Question

Tyler Smith · Accepted Answer

Representation and warranty insurance is an excellent tool for securing a clean exit, but you should not bear the entire financial burden alone. If a buyer insists on a policy, the costs should be shared because the insurance benefits both sides.

A sell-side policy allows you to walk away with minimal post-closing escrow holdbacks, while giving the buyer a direct path to recover losses from an insurer. Use this mutual benefit as leverage. Propose a fifty-fifty split of the premium, underwriting fees, and broker commissions.

Address the deductible or retention amount. Negotiate for the buyer to absorb the first half of the deductible before your indemnity obligation kicks in. This ensures that the buyer has skin in the game and will not file frivolous claims for minor operational issues.

Tie this negotiation back to your operational track record. Show the buyer your historical scorecards and clean compliance records to prove that your operational risks are low. This can help lower the overall policy premium during the underwriting process. By structuring the insurance costs equitably, you protect your hard-earned proceeds while establishing a clean separation from the business.