Retroactive coverage is a concern when you think about insurance coverage for your home inspection business. It is important to be aware that retroactive coverage can expose you if you have a policy with no retroactive coverage.
As we talk about retroactive coverage, this article will discuss the following points.
1. What does retroactive refer to in your liability and insurance policies? Why is this important for your business?
2. Claims Made vs. Insurance coverage for Occurrence
3. How can you determine if your home inspection business is covered by your policy?
Let’s start at the top: What is retroactive coverage? Why is retroactive coverage so important for your inspector insurance policy
Most policies that cover claims-made insurance include retroactive insurance coverage. Retroactive coverage extends your policy’s reporting period to include any prior acts. This basically means that your past work will be covered by the policy. As in most claims made inspector insurance policies retroactively overage would cover inspections that you performed before the current year.
Let’s say you have been inspecting for seven years. You had claims made coverage for 7 years. Without any gaps in that coverage. Your retroactive coverage would include the 7 previous years as well as the year you are buying the new insurance policy.
The only caveat is that you must have insurance coverage for the previous 7 years , and coverage has not lapsed or been discontinued. If you had a lapse, also known as a gap, your retroactive coverage would be lost for acts or inspections that occurred before the gap.
This is why, when you purchase insurance with retroactive coverage, the agent or insurance company will ask you to show that you have had continuous coverage in each year you wish retroactive coverage.
Let’s now discuss the differences between the two types of insurance coverage: Claims made and Occurrence. Both types of coverage offer insurance that covers professional liability claims, but they approach claims reporting differently.
It matters when a claim is reported for coverage. If you have insurance coverage, you will have coverage for the claim if the claim was reported.
It is important to note when an incident occurred in occurrence coverage. If you have occurrence coverage, your protection against claims will apply to claims that result from acts that took place during the policy period.
Let’s take an example to explain further: An occurrence-based insurance policy that was in force from January 1, 2005 through January 1, 2006. A July 1, 2005 inspection leads to a claim. It doesn’t matter if the claim was made between January 1, 2005, and January 1, 2006. It doesn’t matter whether the claim was made between January 1, 2005 and January 1, 2006. You have coverage for the incident based on the date of the act/incident. If you have an occurrence policy form, retroactive coverage is not necessary.
If we look at the same claim in the context of a claims made insurance policy, the only way you would have coverage is if your policy had retroactive coverage and there was no lapse in coverage.
Due to the differences between the two policy forms, claims made and occurrence; occurrence coverage is more expensive than claims made.
How do you find out if your home inspection errors and omissions policy includes retroactive insurance coverage It is important to ask your agent about retroactive coverage when you buy any home inspector insurance policy. The InspectorPRO Insurance policy is available for building and home inspectors. It offers complete retroactive coverage. It is important to ask for it and have the documentation necessary to get it.
