How does nose coverage work?
Let’s use an example:
Say you’re a management consultant and you buy professional liability insurance. Your nose coverage date is January 1, 2023.
You find out a client wants to sue you for negligence. However, you offered services to this client in December 2022. Because this is before the starting date of your nose coverage, the insurance company won’t cover any damages or legal fees.
But if it’s a client that you consulted for after the starting date, then the insurance company can give you coverage.
Nose coverage vs. tail coverage: What’s the difference?
These coverages are related but serve different purposes:
- Nose coverage sets a specific date in the past (the retroactive date) when your insurance coverage begins. It protects you from claims related to incidents that occurred after this retroactive date and during the policy period.
- Tail coverage, also known as an extended reporting period (ERP), allows you to report claims for incidents that occurred during the policy period but were reported after the policy expired or was canceled.
Tail coverage can protect you from claims made after your policy expires, while nose coverage can help cover you for mistakes made before you had coverage.
Why is nose coverage important for small businesses?
Nose coverage is significant for small businesses because it safeguards them from potential legal claims and liabilities related to past work — as long as it falls after the policy’s starting date. It helps protect their reputation, financial stability and peace of mind, allowing owners to concentrate on running and growing their businesses without worrying about unexpected legal issues arising from their past professional activities.
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