---
title: "What Is W&I Insurance?"
term: "W&I Insurance"
description: "W&I insurance — warranty and indemnity insurance — covers breaches of seller representations in M&A, replacing or supplementing escrow holdbacks and personal liability for deal parties."
date: 2026-07-25T00:00:00.000Z
updated: 2026-07-25T00:00:00.000Z
topics: ["venture-capital"]
source: https://venturecapitaltracker.com/glossary/w-and-i-insurance
---

# What Is W&I Insurance?

> W&I insurance — warranty and indemnity insurance — covers breaches of seller representations in M&A, replacing or supplementing escrow holdbacks and personal liability for deal parties.

**W&I insurance** (warranty and indemnity insurance) is M&A insurance that backs the representations and warranties in a purchase agreement — paying valid claims when sellers breach what they promised.

### How it works

In a typical sale, buyers demand seller indemnities for breaches — IP ownership, financial statements, litigation, taxes. Sellers push back with caps, baskets, and escrows holding part of proceeds for 12–24 months.

W&I policies shift risk to insurers:

- **Buy-side W&I:** buyer procures; claims go to insurer instead of seller
- **Sell-side W&I:** seller procures; may cover buyer claims and sometimes seller defense costs

Underwriters diligence the disclosure schedules and data room. Premium often runs ~1–3%+ of policy limit; retention (deductible) applies before coverage. Known issues, fraud, and purchase price adjustments are excluded.

Growth equity and PE exits above mid-eight figures increasingly use W&I to shorten escrow fights and let founders take more cash at close.

### Why it matters

- **Founders:** Smaller escrows and cleaner exits — if you can afford premium and survive underwriting. Material undisclosed issues kill insurability.
- **Investors:** Sponsors close faster with fewer post-close clawback disputes. Policy limits must still align with deal size and identified risks.

### Common mistake

Assuming W&I eliminates all seller liability. Retentions, exclusions, and fraud carve-outs leave exposure — and underwriting fails if disclosure is sloppy.

### Related ideas

See also [warranty and indemnity insurance](/glossary/warranty-and-indemnity-insurance), [escrow](/glossary/escrow), and representation and warranty insurance.

## FAQ

### What is W&I insurance in simple terms?

W&I insurance pays buyers if seller warranties in the purchase agreement turn out wrong — like undisclosed tax issues — up to policy limits, instead of chasing sellers for every claim.

### Why does W&I insurance matter?

For founders selling, it can reduce escrow size and speed signing. For buyers and sponsors, it adds certainty that claims get paid without damaging seller relationships needed for transition.


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Source: https://venturecapitaltracker.com/glossary/w-and-i-insurance