If you’ve stopped trading for a few months, or for good, you might be wondering what to do with your business insurance. You’re not invoicing anyone, you’re not working, you’re not even using the policy. So, do you really need to keep paying for it?
It’s a common situation for sole traders and small businesses. Freelancers on leave, side hustlers taking a break, people closing their business after a run of quiet months. You might think insurance is the least of your worries, but cancelling it without thinking could leave you exposed.
It’s easy to forget how much risk lingers, even after the work stops. Maybe you handed off a final project six months ago. Maybe you’re not even sure when you’ll pick things up again. Insurance feels like a background cost – until something goes wrong.
Let’s examine what options there are:
Can you pause a business insurance policy?
Not really – at least not in the way people hope. You can’t just freeze your cover for a few months and start it back up later. Most policies are either active or cancelled. There’s rarely an in-between.
That said, if you’re paying monthly, you can usually cancel without much hassle. Then, if you start trading again, you take out a new policy.
Simple enough. Just make sure you’re not leaving yourself unprotected if anything from your past work comes back to bite you. Some policies include retroactive cover when you start them again, but not all do – and the gaps can matter more than people realise.
What about cancelling mid-policy?
If you’ve paid upfront for the year, you might be able to cancel part way through and get a refund, but it depends on the provider. Some will offer a pro-rata refund, minus a small administrative fee.
Others might not offer anything if you’re past a certain point in the contract. If you’re nine months in, for example, and the admin fee wipes out what’s left, there may be no real benefit to cancelling early.
The earlier you cancel, the more likely you are to receive a refund. Always check the small print. And if you’re thinking of shutting down your business entirely, it’s worth timing things carefully, especially if you’re within the refund window.
What happens if someone makes a claim after you’ve cancelled?
This is the bit most people miss.
Say you stop trading, cancel your insurance, and then three months later, someone tries to sue you for work you did last year.
If your policy’s gone, there’s no cover. Even though the work happened ages ago, the claim is made now, and that’s what insurers care about.
That’s why some people take out “run-off cover” after they stop trading. It’s a basic level of protection that only covers claims related to your past work. It’s especially useful for consultants, contractors, or anyone giving advice or selling products.
It’s not just service businesses either. If you were selling physical products – even one-offs – and something goes wrong later, like a safety issue or a fault, you could still be liable. And if there’s no active insurance when the claim comes in, you’ll be footing the bill yourself.
When cancelling makes sense
If you’re sure you won’t be trading again – or you’re happy to risk not being covered – then cancelling is usually fine. Just make sure you let your insurer know officially. Don’t just stop paying and hope for the best.
And if your insurer offers flexible monthly terms, even better. You can stop paying when you stop trading and start again when things pick back up.
A lot of sole traders go quiet for long spells – especially in seasonal work or after a busy contract run. There’s no harm in switching off your cover if you’re careful about the risks. Just don’t assume nothing can go wrong while you’re off the radar.
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