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Nose coverage

Nose coverage refers to insurance protection for incidents that occurred before you purchased your current claims-made insurance policy.

What is nose coverage?

Nose coverage is a feature of claims-made insurance that covers a mistake or oversight you made while insured under a previously terminated policy. Also known as prior acts coverage, it involves your new insurer extending its coverage to something you did in the past while you were insured by another carrier.

Why is nose coverage necessary?

Nose coverage is necessary because claims-made policies only cover claims filed while your policy is active. If you switch insurance providers, as long as you maintain continuous coverage, your policy is considered active and nose coverage can protect you from claims. However, the incident must have happened after your current policy’s retroactive date.

Nose coverage is found in a variety of claims-made policies, including errors and omissions, professional liability, and directors and officers insurance.

What is the difference between nose coverage and tail coverage?

Nose coverage addresses acts that occurred prior to your current policy’s start date. Tail coverage applies to acts that occurred while your prior policy was in force, but for which claims didn’t arise until after you canceled it.

Do all small businesses need nose coverage?

Not necessarily. For first-time buyers of a claims-made liability insurance policy, the retroactive dates will be the policy’s inception date (the date their coverage started). Why? Because the insurer will be reluctant to cover their prior acts since they’ve never had liability insurance before.

However, if you had liability insurance for many years and never had a gap in coverage, your new insurer will likely offer you full coverage for your prior acts. This will extend back to the first day you had liability insurance. In most cases, as long as you can prove your continuous insurance history, this won’t cost extra.

If you have gaps in your prior coverage, you’ll need to negotiate a retroactive date with your insurer.

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