Prior Acts Coverage

What Does Prior Acts Coverage Mean?

Prior acts coverage is insurance that applies to events that occurred before the purchase of the policy. It is a common feature of liability policies and is typically used to close the gap between when services were provided and when claims are filed.

Insuranceopedia Explains Prior Acts Coverage

Insurance companies typically do not provide policies with prior acts coverage unless the business seeking to purchase it has had previous insurance coverage. This prevents companies from waiting to buy insurance until they anticipate needing to file a claim.

While this helps insurers avoid “free-riding,” offering prior acts coverage increases their exposure to higher claims risk. As a result, companies offering this type of coverage often charge higher premiums, at least for a certain period of time.

Although some policies offer full prior acts coverage, many only cover events that occurred after a specified retroactive date.