When you consider insurance coverage for your home inspector business you are not doubt concerned about retroactive coverage. You should be concerned; if you get a policy without retroactive coverage you could be exposed on a claim outside your policy period.
This article will talk about the following points as we discuss retroactive coverage.
1. What does retroactive mean to your insurance policy and liability coverage and why is having that coverage vital to your business
2. Claims Made vs. Occurrence insurance coverage
3. What are the ways you can determine if your policy has retroactive coverage for your home inspector business?
Starting at the top, What is Retroactive Coverage? And why is it so important to your inspector insurance policy?
Retroactive insurance coverage is part of most claims made insurance policies. The retroactive coverage part extends the reporting period of your policy to include prior acts. Basically what that means is that the policy will cover or "pick up" your past years of work. So, as in most typical claims made inspector insurance policies retroactive overage would pick up inspections you have performed prior to the current year or your policy.
Here is a really basic example.....let's assume you have been performing inspections for 7 years. And you carried claims made coverage for each of those 7 years, without a gap in that coverage. The retroactive coverage part of your home inspector e & o insurance policy would cover the previous 7 years in addition to the upcoming year you are purchasing the new insurance policy to cover.
The one major caveat....... You must have had insurance coverage for each of those previous 7 years and had no lapse or break in coverage. Were you to have a lapse in coverage, otherwise referred to as a gap, the acts or inspections prior to the gap would lose their retroactive coverage.
The gap is why when you are purchasing insurance with retroactive coverage available the insurance company or agent asks you to prove that you have had continuous coverage for each of the years you want the retroactive coverage for.
Now, let's address the difference between the 2 types of insurance coverage available; Claims Made and Occurrence. While both types of coverage provide insurance to cover professional liability claims they approach claims reporting very differently.
In claims made coverage it matters when the claim was reported. So if you have claims made coverage when the claim is reported or made you have coverage for the claim from the insurance policy.
In occurrence coverage it matters when the incident occurred. So, if you have occurrence coverage your protection for claims is applicable to claims that arise from acts that occurred during your policy period.
To explain the difference further, let's say you have an occurrence based insurance policy from January 1, 2005 - January 1, 2006. You perform an inspection July 1, 2005 that leads to a claim being made. It does not matter if the claim is made between January 1, 2005 and January 1, 2006. It also doesn't matter if you have a current policy from that insurance company, you have coverage for the claim based on when the act/incident occurred. There is no need for retroactive coverage if you have an occurrence coverage form.
Now, if we examine the same example in reference to a claims made policy, and the claim is reported on July 1, 2010 the only way coverage would be available to you is if you had retroactive coverage on your current policy and you did not have a lapse in coverage.
Because of the difference of the 2 policy forms; claims made and occurrence, occurrence coverage is much more expensive than claims made.
Finally, how do you know if your home inspector errors and omissions insurance policy has retroactive insurance coverage? When you purchase any home inspector insurance policy it is very important that you ask your insurance agent about retroactive coverage. The InspectorPRO Insurance policy for home and building inspectors offers full retroactive coverage. Just make sure you ask for it and provide the necessary documentation to obtain it.
If you have more questions about retroactive insurance for your home inspection business please call me at 801.610.2700 or check out our website at http://www.inspectorproinsurance.com/
Ryan Osborne is the National Director for the InspectorPro Insurance Program. He and his team help inspectors throughout the US find and obtain the proper insurance coverage for their home inspection business. You can contact Ryan at 801.610.2700
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