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Retroactive Insurance Coverage: What is Retroactive Coverage?

Retroactive insurance coverage refers to cover for services undertaken before the policy start date. It determines the earliest point in time from which the insurance cover applies. Any losses or incidents that occurred before this point won’t be covered by your policy.

Having said that, some policies give you the option to purchase retroactive insurance to get a cover for losses incurred before a specific date. Here’s what we’ll discuss in this article:

  • Why you mustn’t let your professional liability insurance drop for a single day.
  • Why you must know about the retroactive date.
  • How to maintain your retroactive date while switching insurers.

Why you shouldn’t let your professional liability insurance drop for a single day?

Let’s use an example to highlight the seriousness of this point.

A law firm acquires a professional indemnity insurance contract. One that provides annual coverage for the period 01/01/2020 – 01/01/2021.

In case the law firm doesn’t renew the contract immediately after it has lapsed, but takes, let’s say, 10 days from the expiration date (i.e., 10/01/2021), they’ll have lost the retroactive coverage. What this means is that the law firm would have lost coverage for all cases it handled before 10/01/2021.

That means that if any of the law firm’s clients file a lawsuit for a case handled between 01/01/2020 – 01/01/2021, the insurance cover will not step in to the law firm’s rescue. That is because retroactive coverage only applies if the insurance is continuous without any gap.

This is why it’s crucial not to let your professional liability insurance policy drop for a single day.

Why you should know about the retroactive date

Retroactive date is important because it determines how far back in time the policy will cover you for an incident. Remember, even if the incident occurred one day prior to the final retroactive date, your insurance coverage won’t be able to come to your rescue.

How to maintain your retroactive coverage while switching insurers?

If you want to switch your insurance company, make sure that your insurance contract with the new company begins on the same day your contract with the previous company ends. Only then you’d be able to maintain your retroactive coverage.

The customer should also ask their new insurance company to include the term of retroactive coverage so that the new insurance policy will cover them for lawsuits related to cases for the period they were insured with a previous insurance company.


Pitsas Insurances

September, 2022

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