Contractor Guides

What is retroactive cover?

When looking at your contractor insurance options, it’s important to understand exactly what the policy is offering you, to ensure…

Author Photo by Kingsbridge

When looking at your contractor insurance options, it’s important to understand exactly what the policy is offering you, to ensure you’re getting the best value for money and a policy that’s right for your circumstances. This often means delving a little into some of the terminology and jargon used to make sure it’s clear to you – and you know exactly what you’re getting. Otherwise, you could end up with either a policy that doesn’t do enough for you and leaves you underinsured or a policy with all the bells and whistles – most of which you don’t need.

One of the terms you’re bound to come across at some point is ‘retroactive cover’, but what exactly is it and why is it great to have?

Why do I need retroactive cover with my contractor insurance?

Retroactive cover sounds as if it’s really complicated, but it’s not. usually associated with Professional Indemnity insurance, the Retroactive cover means that your policy will cover claims made against work carried out before your policy started. Why? Professional indemnity claims operate under a “claims made” basis, which means you must have insurance in place at the time of the claim and not necessarily when the work was carried out. This is different to most insurances because a professional indemnity claim can take some time to be brought forward following negligence.  The length of time of the retroactive clause will be detailed by your insurance provider. This date is usually 6 years and in line with the statute of limitations with the added requirement that you have insurance in place when the claim was made, and you had insurance when the work was carried out. For contractors, you would typically see retroactive cover available for professional indemnity insurance.

Retroactive cover is particularly handy if you’re changing your insurance provider, as it means that prior work is still covered even though you’re now with your new insurer. So, if you’re trapped with a business insurance provider that you’re not happy with but are worried about leaving because all your work is currently covered by them, having retroactive cover with your new insurance will help to ensure a smooth transition.

Where can I get retroactive cover?

It’s worth noting that not all providers offer retroactive cover. Some will charge an extra fee for this to be included and some will simply cover you for work carried out from the policy start date onwards. This can prove tricky as it could effectively leave prior work uninsured, meaning you are liable should clients bring a case against you for professional negligence. In some industries, it could take months, or even years, for a mistake on your part to come to light, so it’s certainly not impossible that this could happen.

Kingsbridge Contractor Insurance includes retroactive cover with an unlimited date (not restricted to 6 years) as standard in all their professional indemnity policies (Excluding chartered professionals who have previously engaged in a practicing role), giving you peace of mind that you’re covered even for work completed up to six years ago.

What is professional indemnity cover?

Professional indemnity cover is a pretty standard part of any suite of contractor insurance. It’s usually a contractual requirement – along with public liability and employers’ liability – of most end clients and agencies, so contractors are generally expected to have it, often with a specified amount of cover.

Professional indemnity is designed to protect contractors against claims of professional negligence, as well as loss of data, loss of documents, libel and defamation, and breaches of intellectual property. So, if you make a mistake that you are responsible for, or you have been deemed negligent, your professional indemnity insurance will cover things such as compensation and legal costs so that you do not need to put your own finances on the line.

As an example, you’re a software designer engaged by a pensions provider to build a new system for managing members’ payments. You make some mistakes with the coding that results in members’ payments going missing, with knock-on effects for both the business and its clients. Your client makes a claim against you for compensation to cover the losses. Without professional indemnity cover, you would be liable to pay all of this, as well as your legal costs. However, if you’re insured, your professional indemnity cover picks up the costs, reducing, or even eliminating them.

At the end of the day, we all hope that we won’t, but everyone makes mistakes. You don’t want one of your own from a few years ago causing you to lose savings or other assets.

How do I get covered?

The best way to cover yourself is by taking out a comprehensive package of business insurances that cover you for all eventualities. Kingsbridge’s insurance for contractors is just such a package, giving you:

  • Professional indemnity cover (including six years of retroactive cover)
  • Public liability insurance
  • Occupational personal accident cover
  • Employers’ liability insurance
  • Directors’ and officers’ liability insurance

Taking out a package like this saves you the hard work of finding every policy individually and gives you the peace of mind of knowing you’re covered for all eventualities. It also fulfils most contractual obligations regarding your insurance status. If you’d like to find out more, you can call our expert team on 01242 808740 for a chat about your requirements, or get a quote online if you already know exactly what you want.

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