Role of Tax Liability Insurance on Complex Business Transactions: Hauser Insurance
Running complex business transactions requires frequent navigation that has been identified in tax-specific indemnities or tax exposures. This is especially critical when preparing yourself for a merger or acquisition. The following are insights from Hauser Insurance on tax liability insurance.
Main Purpose of Tax Liability Insurance
This insurance can be used as a supplementary tool to seller indemnity when you have potential tax exposures. Essentially, the insurance becomes a form of RWI – representation, warranty, and indemnity.
Mergers and Acquisition
RWI is essential in facilitating acquisitions and mergers. If unavailable, tax liability insurance ensures that the buyer has other methods of protection.
Replacement Functions or Offset
Tax liability may also be used as an offset for seller special indemnity. In addition, it can be a replacement for purchase price adjustment and an escrow.
Transactions Before Purchase
If you are a participant in an M&A, tax liability insurance is a great asset. This protects you from known risks and gives you a better bidding environment.
Utilization of Policies in Transactions That Are Not M&A
Essentially, you can obtain tax liability insurance from internal tax reforms. The insurance is also crucial in the completion of transactions that are of tax indemnity status.
Issuance of Deferred Compensation
With Hauser Insurance, you get tax liability insurance to help backstop the indemnity that compensation recipients have from the issuer of the deferred compensation.
Coverage of Loss and the Retention Parameters
With tax liability insurance, you are protected from loss-generating items such as tax interest, taxes, and penalties.
Other concepts of tax liability insurance include:
- Final adjudication concept
- Policy exclusions for TLI (tax liability insurance)
- Coverage quotation
With tax liability insurance, Hauser Insurance ensures that you are protected from problematic M&A acquisitions. In addition, with TLI, you are covered against losses and compensation that might arise from taxation.