Eight insurance terms you must know.
Defines type of insurance. Occurrence insurance responds to the event (claim) on the basis of the date the event occurred. Claims made insurance responds to the event on the basis of the date when the claim is made.
2. Retroactive Date:
The earliest date which a claim can have taken place and be presented to the insurance company and still be covered by the policy. Retroactive dates are only present in claims made policies.
3. Effective/Expiration Date:
The effective date is the first date the policy is in place and providing coverage. The expiration date is the last date the policy will be in place and providing coverage.
4. Limits of Liability:
The total amount the insurance company will pay on the insured’s behalf. The most common limits In California are $1 million per claim and $3 million in the aggregate.
5. Per Claim Limit:
The maximum amount the insurance company will pay for any one claim made during a covered period effective date to expiration date and any extended reporting period.
In a $1M/$3M policy, each claim has a $1 million maximum payment set by the insurance company.
The maximum dollar amount the insurance company will pay during the policy period effective date to expiration date and any extended reporting period). In a $1M/$3M policy, a maximum of three $1 million dollar claims can be paid. ($1M x 3 claims = $3M).
7. Extended Reporting Period:
The ERP is available to be purchased from the carrier following the expiration date of the policy. Allows an insured with a claims-made policy to report claims within a specified period of time. Also known as the “tail” period.
Note that no additional coverage is given with the ERP, nor are additional limits applied to the policy. The ERP only allows the insured physician to report claims for a longer period of time. Some carriers reduce the limits on extended reporting periods.
8. Prior Acts Coverage:
Purchased from the new carrier when coverage is changed from one insurance carrier to another. Prior Acts coverage makes all claims that have occurred subsequent to the retroactive date and are unknown by the insured to be claims or a circumstance likely to give rise to a claim, the responsibility of the new insurer. Also known as “Nose Coverage”.