The retroactive date on professional indemnity insurance is the date from which you are first covered. Any work or service carried out prior to the retroactive date is not covered.
Even if you have switched insurer multiple times over the years, so long as there have been no breaks in your cover, then you will be covered for any work completed throughout the entire duration that you have held a professional indemnity policy.
Professional indemnity insurance is based on ‘claims made’. ‘Claims made’ policies cover you for any negligent work carried out during the policy period, as opposed to ‘claims occurring’ policies which cover you for any claims incurred during the policy period. (You can read more about this in our article, “‘Claims Made’ vs ‘Claims Occurring’: What’s the difference?“.)
Retroactive cover on a ‘claims made’ basis is needed for professional indemnity policies as many issues can take months, years, or even decades to surface. Faulty wiring or mistakes made during building construction and planning can take a long time to be uncovered. Even something such as accidental copyright infringement may not be immediately picked up on until years after the fact, when you are contacted by a legal representative of the copyright owner. This is why it is often a wise choice to continue your policy, even long after you have retired or ceased trading.
Continuous retroactive cover, extending back to when you first held professional indemnity, ensures that you are protected for all the work you have done since, and not just for the duration of your current policy.
What’s the difference between ‘inception date’ and ‘retroactive date’?
The inception date is the date from which your new policy begins; it’s how far back your existing policy goes.
The retroactive date is the date from which you first took out PI cover; it’s how far back your coverage goes uninterrupted.
So if you first took out a professional indemnity policy on 1 January 2010, and have renewed it on time every year, the retroactive date would be 1 January 2010 and the inception date would be the start date of your current policy (e.g. 1 January 2018).
What does this mean for your PI policy?
For a claim to be valid, your insurance needs to be in place at the time that the claim is made and can’t have resulted from work that was carried out prior to the retroactive date. You need to ensure that you are covered continuously.
This is why it is important to renew or replace your policy as soon as it expires, to prevent any gaps in which an invalid claim may be made. If you cancel your policy, then you are at risk of any claims made after the cancellation date. Even if you were covered during the time that you undertook the work.
If you wish to be covered for previous completed work (for example, starting from 1 January of that year), insurers will sometimes allow you to backdate your retroactive date. You may choose to do this if failing to purchase PI was a complete oversight, and you may even have been innocently unaware that this type of policy even existed. You should, however, expect this mistake to be reflected in the premium, due to the higher risk to the insurer.
Be aware that insurers may refuse this request if they suspect that you an ulterior motivate and are anticipating a claim.
- ‘In the aggregate’ vs ‘any one claim’: What’s the difference?
- ‘Claims Made’ vs ‘Claims Occurring’: What’s the difference?