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Tax Liability insurance provides protection for losses incurred as a result of a taxing authority challenging or revoking a previous tax position. Tax liability insurance can be structured in a variety of ways, allowing for flexibility and unique situations. Pricing and retention are structured on a case-by-case basis.
Tax Liability insurance differs from Reps & Warranties insurance in that it will pay for taxes, interest, fines and penalties, defense costs, and gross-up of taxes payable in the event of a loss. This applies to federal, state, local or foreign tax exposure.
Highlights
- Structure: Can be very flexible and tailored to individual situations
- Applicability: Federal, state, local or foreign tax exposure
- Cost: Pricing and retention are structured on a case-by-case basis, but can range anywhere from 4-10%
- Policy Period: Length of policy usually matches the statute of limitations
- Coverage: Will pay for taxes, interest, fines and penalties, defense costs, and gross-up of taxes payable in the event of loss