Retroactive Date in Liability Insurance – What it is?
Retroactive Date in Liability Insurance is the earliest date from which your Liability Insurance Policy will cover Insurance Claims arising under the Policy. A Liability Insurance Policy will not provide any Insurance Coverage for Claim Incidents occurring prior to Retroactive Date.
Retroactive Date will the starting date of the first liability insurance policy that you have purchased and will remain the same for subsequent years provided that the Policy has been renewed without any break in Coverage.
Retroactive Date is an important feature of a Claims-Made Liability Insurance Policy and is used in all types of liability insurance policies such as Errors and Omissions Insurance, Commercial General Liability Insurance, D&O Liability Insurance Policy etc.
What is the importance of Retroactive Date?
Claims-Made Insurance Policies only cover Loss Incidents which occur and are reported within the Policy Period. However, sometimes, Claimants may take years to file a lawsuit against the Insured. In such cases, the Liability Insurance Policy will provide Coverage only if it has Retroactive Date Coverage.
Retroactive Date thus shields Policyholders from gaps in coverage. In absence of Retroactive Date Coverage, the Current Liability Insurance Policy will not provide coverage for Incidents which happened in the Prior Policy Period.
When a liability policy is renewed or changed, Retroactive Date ensures that Claim Incidents happening in the Prior Policy Period stay covered under the new policy.
We can better illustrate this with the help of an example:
An Architect faced a lawsuit over a building project from 8 years ago. Fortunately, he had an Architects’ Professional Indemnity Insurance Policy with a Retroactive Date, so his past work was still covered under the Current Policy and thus he didn’t suffer financially.
Retroactive Date thus ensures continuity in coverage by providing Insurance Coverage for Incidents which happened years ago, provided the Policy is renewed without any break and the Retroactive Cover is maintained.
Continue Retroactive Date Coverage when switching Insurance Companies
Sometimes it becomes necessary to switch Insurance Companies because of unfavourable terms or refusal of existing Insurance Company to renew the Policy. In such cases, it is extremely important to maintain Retroactive Date Coverage with a new Insurance Company when renewing the Policy to ensure continued coverage. It is necessary to obtain a written confirmation from the new Insurer about Retroactive Date Coverage by means of an Endorsement.
It’s very important to keep Retroactive Dates Coverage in Liability Insurance to ensure continued coverage. Qian Insurance Broking has assisted various business owners with comprehensive Liability Insurance Quotes and Coverages.
We would be glad to assist you!