Nose coverage refers to insurance protection for incidents that occurred before you purchased your current claims-made insurance policy.
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.
As a small business owner, you know it’s important to understand how your insurance policy works.
A claims-made policy provides benefits only if you file a claim after the policy start date. If you cancel your policy and then report a claim, it will not be covered.
In this case, if you had a $1 million claims-made policy and are sued for $1 million in your first year, you’d no longer have coverage. That is, unless you increase your policy limit in the second year.
Occurrence-based and claims-made policies are often found in specific types of insurance coverage.
For example, claims-made policies will often be found in your directors and officers coverage and your professional liability insurance, which is also referred to as errors and omissions insurance.
If you’re just starting out, you may want a lower cost claims-made policy.
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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 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.
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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