The retroactive date in a liability insurance policy is either –
- Date from which you have held uninterrupted insurance cover (despite changing insurers on renewal) or
- Date from which your insurer has agreed to provide
The retroactive date is important because it determines how far back in time an incident can occur for your policy to still protect you. Any claim arising from events that have occurred prior to the retroactive date is excluded from the cover.
As claims-made insurance policies cover liability claims that surface while the policy is active, no matter the original loss could have occurred many years in the past. Hence in order to stay protected one must carry forward the retroactive date of the first policy purchased in each renewed policy by avoiding gaps during policy renewal.
In case there is a gap at policy renewal, retroactive benefits are lost as insurers offer coverage from the new policy date. In an exceptional case, the expiring insurer may agree to reinstate retroactive date benefit for the client upon a charge of the additional risk premium and NKORL (no known or reported loss) declaration.
Let us use illustrate the retroactive date concept with an example –
Suppose a client purchased the first D&O policy on 01 April 2015. The policy was timely renewed by the client maintain the policy retroactive date as 01 April 2015 (though he kept switching insurers based on quoted premiums and policy terms & conditions). A claim was reported in the current policy as a result of an event that had occurred on –
- 01 January 2015
- 01 January 2016
Since the retroactive date of the policy is 01 April 2015, claims for events occurring after the retroactive date will be covered in the policy. Hence claim for which the event date is 01 January 2016 will be accepted and the other claim for which the event date is 01 January 2015 will be rejected.