Do you need retroactive date in your PI cover?
That very much depends on how long your business has been operating.
Imagine you're a brand new business about to start trading. You don't need a retroactive cover, in other words insurance for past work, because you haven't delivered any services yet. In this situation you will purchase your very first professional indemnity cover and the start date will be used to set the retroactive date. Let's use 1 Jan 1900 as an example.
A year later your professional indemnity cover comes up for a renewal. At this point you might consider checking out the market to see whether you can find a better deal. Once you start searching for alternative quotes, almost every provider of professional indemnity insurance will ask you for a retroactive date and it is important that you provide that information. In our example your retroactive date is 1 Jan 1900.
Let's say you have found a better price so you have decided to cancel your current PI cover. Effectively by doing so you have rereleased your old insurers from any obligations towards your business. This is why your new insurers must take over from the retroactive date being 1 Jan 1900. Your new PI cover should therefore state two dates:
Start date: 1 Jan 1901 - the date you entered into a contract with your insurers
Retroactive date: 1 Jan 1900 - the date from which your insurers agreed to protect your business
If your new insurers don't agree to cover your business from the retroactive date, you are effectively uninsured for any claims as a result of work delivered in the first year of trading.
Not all retroactive covers are equal
Some insurers won't let you set a retroactive date at all, some will but only if you've held uninterrupted PI insurance up to now and some, like Suited, will let you pick any date in the past whether or not you've been previously insured.
Some professional indemnity providers do not like to take on past liability, in other words they won't let you pick a retroactive date. For a business that's been operating for some time, that's obviously no good to you.
Some insurers will make a retroactive cover conditional asking you to confirm that you've been continuously insured since your retroactive date. That's ok if you have but if, for one reason or another, there is a gap in your PI insurance history, this is also not a good option for you.
A handful of PI providers won't hold you to any condition at all and let you pick a date in the past whether or not you have been insured. They might charge a little extra for that. This is a very good option for anyone who, as mentioned, can't evidence a continuous PI cover history or have never arranged PI cover before despite running a business.
Why doesn't my previous PI insurance cover my past work?
Professional indemnity insurance works on when a claim against you is made. Sometimes it can take months before a mistake manifests itself and you must be insured when it is discovered otherwise you're not protected.
No live PI insurance = no protection
The fact that you were insured at the time when you made the alleged mistake is irrelevant. As we mentioned above, the moment you cancel your PI cover, you're releasing your insurers from all obligations to pay your claims.