What does the retroactive date indicate in an insurance policy?

The retroactive date in an insurance policy indicates the specific date from which coverage applies concerning claims or losses. This date is particularly significant in liability insurance policies, such as professional liability or errors and omissions insurance. It defines the starting point for which incidents or occurrences must take place in order for coverage to be valid under the policy. If an event happens after the retroactive date, the insurance policy will provide coverage, assuming all other conditions and terms are met.

For instance, in a professional liability policy, if the retroactive date is set to January 1, 2020, any claims arising from incidents that occurred on or after that date would be covered. However, incidents that took place before that date would not be eligible for coverage, regardless of when the claim is filed. This helps insurers manage risk by limiting their exposure to incidents that occurred before the policy was in effect or before the agreed-upon retroactive date.