What Is a Retroactive Date on Your Business Liability Insurance

What Is a Retroactive Date on Your Business Liability Insurance

When purchasing some forms of business insurance, it is important to consider your business’s past. Most of the time, insurance policies apply only from the date the policy goes into effect and beyond. However, it may be possible to secure some types of liability insurance retroactively. That could mean protection for work your company did in the past. This can be a complex topic, but consider the following.

When Is This an Option?

It’s not possible to purchase business property insurance with a retroactive date. In fact, most types of business insurance do not apply here.

However, for those purchasing professional indemnity insurance or professional liability insurance, it may be an option. This type of insurance is usually necessary for any person that provides professional advice or guidance to another person or business. If you are giving advice to others in any form, professional liability insurance is essential.

The key to ask yourself, as a business owner, is what type of coverage you have for the work you did in the past. If you do not know if you have any type of coverage that applies to your previous work or advice, it may be important to consider a retroactive date on a new insurance policy.

How Does This Work?

Let’s say you do not take out professional liability insurance initially when you open your business.

You start your company, work your business, and guide customers with your advice. A customer comes to you months later with a claim. If you do not have coverage, what can you do?

Many companies realize they actually need professional liability insurance long after they should have had it in place. By setting a retroactive date with your new insurance policy, you can cover those previous potential claims.

The underwriter for your policy may be willing to backdate your coverage. It’s very important to know who you are buying from in this case. Not all policies offer this coverage. Some may be significantly more expensive to have this feature. More so, backdating like this can be limitedly accessible. That is, you need to know when a claim would apply and if the insurer would approve it.

If you did not have professional liability insurance previously, but you know you should have, speak to your business insurance agent. Consider the value of purchasing a retroactive policy now. It may keep your business operational if claims do arise. In all cases, your best bet is to get coverage from the first day of doing business.