Professional indemnity insurance: what’s a retroactive date
Whether you’ve just taken out a professional indemnity policy or you’re shopping for new business insurance, chances are you’ve come…
When you’re choosing insurance, you’ll often come across two terms: claims made and claims occurring. They both refer to the…
When you’re choosing insurance, you’ll often come across two terms: claims made and claims occurring.
They both refer to the claims basis your insurance policy works on i.e. if a claim might be covered based on when the claim is made versus when the incident took place.
They might sound technical, but understanding the difference is really important – it can affect whether you’re covered when something goes wrong. The good news is getting your head around what both terms mean is probably easier than you think.
In this guide, we’ll break it down in simple terms, with examples you can relate to – whether you’re on-site or in office.
Disclaimer: this is a general guide relating to insurance. Always check your policy documents and schedule for exact coverage details. If you’re unsure, always check with your insurance provider for confirmation.
For those wanting a straight answer, both refer to the claims basis of a policy, determining the criteria for a claim to be valid:
The key difference: one covers you if the claim is reported during the policy period and the other covers you if the incident occurred during the policy period.
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A policy written on a claims made basis can pay out for any claim notified to insurers during the period of insurance, even if the incident happened earlier (before the policy started).
A claims made policy only covers you if:
A retroactive date is provided where your policy offers retroactive cover – meaning you can be covered for work completed before your policy started, as long as the claim is made while the policy is active (i.e. on a claims made basis!).
Normally associated with professional indemnity (PI) insurance, a retroactive date defines how far back your insurer will cover you for past work.
Assuming a currently active policy has a retroactive date of 12th March 2023:
You can check out our guide to retroactive dates for a full run down of what they are and how they work.
A business is sued for professional negligence in relation to a project they worked on in June 2024:
It’s important to note that if you change insurer, you may lose your original retroactive date. It is possible to transfer it but you need to make your new insurer aware of your current retroactive date and get confirmation that they’ll honour it.
Switching insurer may create gaps in cover if you don’t manage it carefully. Before cancelling an existing policy, you should think about the following:
If you’re unsure about any aspect of switching or cancelling your professional indemnity insurance, speak to your insurer or broker.
The other type of payment basis, claims occurring can pay out for claims involving incidents that occur during the insurance period, even if the claim is made later (after the policy ends).
A client claims against a business for property damage on a previous project completed in October 2024:
There’s no “one-size-fits-all” answer for which is better. It totally depends on your work and which insurance you need.
Claims made is typically offered with professional indemnity (PI) insurance, whereas claims occurring is normally associated with public liability (PL). So, the first question you should be asking is which policy you need. Then you can consider on what basis they cover you and if you need extra protection.
For example, PI insurance covers you for past work providing the policy is currently active. So if you cease trading or merge businesses, something like a run-off cover extension could continue to cover you for past work.
Understanding the claims basis of your policy is critical – it’s not just paperwork, it’s protection.
It’s one thing to buy insurance, but when it comes to making a claim, you need to know what you’re covered for and how your insurance can react to an incident.
If you purchase an insurance package that includes multiple cover types (e.g. professional indemnity + public liability + employers’ liability), you should always check your policy documents to understand how your business is covered.
Claims made vs claims occurring example
An insurance package could include:
As always, if you’re unsure what your insurance covers, contact your insurer for clarification.
Claims made vs claims occurring isn’t just industry jargon, it directly affects whether you’re protected when something goes wrong.
If you’re unsure which applies to your policy, it’s always worth checking with your insurer – the difference could be significant when you need to claim.
Hopefully you can walk away with a better understanding of how your insurance policy works, but if you still have questions, we’re here to help.
With Kingsbridge insurance, we provide access to dedicated in-house experts who can take the time to talk you through your policy and assist with any queries you have.
Need help understanding your policy? Get in touch today on 01242 801 603 or email our support team.
In the UK, professional indemnity insurance is almost always written on a claims made basis. If the policy has lapsed by the time a client makes a claim, there may be no cover, even if you were fully insured when the work was done. Always check your policy documents for the exact terms.
Public liability insurance in the UK is typically written on a claims occurring basis. This means it could cover incidents that occur during the policy period, regardless of when the claim is eventually made. For a full explanation of how public liability cover works, visit our public liability insurance page.
Run-off cover is a type of insurance for businesses that have stopped trading. It’s designed to cover claims that might be made in the future regarding work completed in the past. Since claims made policies only work while they are active, run-off cover may help to maintain your protection after you retire or close your company.
Run-off cover may be worth considering if you’re:
Six years is the usual benchmark for run-off cover, reflecting the main limitation period for contractual claims under the Limitation Act 1980. Longer cover may be sensible in some cases, like for professions with longer-tail risks like architecture, engineering, or construction consultancy. Or, where work was done under a deed, it can carry a 12-year limitation period.
Some professional bodies, including ACCA and RICS, typically expect at least six years of run-off cover, and for some firms the Law Society makes it a regulatory requirement. It’s always worth checking the specific rules that apply to your profession or membership body.
Cancelling a claims made professional indemnity policy doesn’t remove your liability for past work. It cuts off the insurance that could respond to it. So, if a former client brings a claim after the policy ends, there may be no insurer to defend the case or pay compensation, leaving you to cover the costs yourself.
If a claim is made after your PI policy has ended and you have no run-off cover in place, there may be no insurance to respond. This is why it may be worth either keeping your policy continuously active or arranging run-off cover when you stop trading.
Claims made policies typically have lower initial premiums because in the early years the insurer is only covering a limited period of past work. Premiums tend to rise over the first few years as the retroactive cover period grows. Over a full career, the total cost may be broadly similar once run-off cover is factored in.
Public liability insurance is typically written on a claims occurring basis, so it may cover incidents that happened while the policy was active, regardless of when the claim is filed. This generally means run-off cover isn’t required for public liability in the way it is for professional indemnity. That said, it’s always recommended to check your specific policy terms.
A gap between two claims made policies may result in the new insurer resetting your retroactive date to the start of the new policy. This could remove cover for all work completed before the gap. It’s often beneficial to ensure your new policy starts on the day your previous one ends, and to confirm in writing that your retroactive date has been carried forward.
Cyber insurance is often written on a claims made basis, similar to professional indemnity. A data breach or system attack may not be discovered until weeks or months after it occurs. Because the harm tends to be financial rather than physical, insurers may use the claims made model to manage the timing risk. If you hold cyber insurance, you should check the basis of cover with your insurer.
Your policy document or schedule should outline which basis your policy uses. A claims made policy will typically refer to claims first made during the period of insurance. A claims occurring policy is more likely to refer to injury or damage occurring during the period of insurance. If the wording is unclear, always ask your broker for confirmation of the basis of cover.
Product liability insurance is typically written on a claims occurring basis, similar to public liability. The policy active when the product caused injury or damage is generally the one that may respond, regardless of when the claim is made. If you’re a tradesperson or manufacturer, this may mean that past products remain covered by the policies that were in force at the time, even if you’ve since changed insurer or cancelled your cover.
Changing career or moving out of a professional role doesn’t remove your liability for past work. Because professional indemnity is claims made, a former client could still make a claim relating to work you completed years earlier. If you stop providing professional services, you may wish to consider run-off cover to maintain protection for that period. This is particularly relevant if you worked as a contractor or consultant and are moving into a different type of role.