DEFINITION of 'Prior Acts Coverage'

A feature of an insurance policy that extends the coverage of insurable events to dates prior to the policy being purchased. Prior acts coverage is a feature of liability policies, and bridges the gap between when services are rendered and when claims are filed as a result of those services.

BREAKING DOWN 'Prior Acts Coverage'

Most liability policies are effective for a short period of time, such as one year, and cover risks that are identified in the policy language and which are reported during the time in which the policy is effective. When the policy ends, there is no further coverage even if there are claims that have not yet been reported. Any claims that are made after the insurance policy's end date will have to be covered by a new policy. Policies may also only cover events that occur during the policy year, meaning that no coverage is granted under the current policy if the event occurred before the policy’s effective date.

Prior acts coverage extends the date at which coverage is extended backwards in time. This is an especially useful feature for damages or injuries that may take a long period of time to develop. For example, a doctor with liability insurance may see a claim filed by a former patient years after the patient was treated. The doctor may have changed policies by the time the claim is filed.

Generally, insurers will not provide an insurance policy with prior acts coverage if the business looking to purchase coverage has not had insurance coverage previously. This protects the insurer from underwriting policies to businesses that wait until they believe that they will have a claim before purchasing coverage. Because offering prior acts coverage increases the insurer’s claims exposure, an insurer would often offer this type of coverage with more expensive premiums which are to be paid for a period of time.

RELATED TERMS
  1. Coincidental Excess Coverage

    Insurance coverage that provides excess coverage for a specified ...
  2. First Dollar Coverage

    An insurance policy feature that provides full coverage for the ...
  3. Liability Insurance

    Any type of insurance policy that protects an individual or business ...
  4. Umbrella Personal Liability Policy

    A type of insurance policy that provides excess coverage above ...
  5. Commercial Package Policy (CPP)

    An insurance policy that combines coverage for multiple perils, ...
  6. Occurrence Policy (Insurance)

    An event that can result in the filing of an insurance claim.
Related Articles
  1. Insurance

    For Top-Notch Insurance Coverage, Compare Quotes

    Find out how to use and compare policy options to get the best coverage at the best price.
  2. Insurance

    Do You Need Casualty Insurance?

    Find out how different types of coverages can protect you and which policy is right for you.
  3. Insurance

    4 Reasons Why Waiting To Buy Life Insurance Is a Bad Idea

    Understand the benefits of applying for and securing life insurance coverage while you are young and healthy, and learn the cost of waiting to get coverage.
  4. Insurance

    How Much Car Insurance Do I Need?

    Find out to determine how much car insurance you actually need with this overview of the different types of coverage available in your policy.
  5. Financial Advisor

    7 Issues to Consider When Determining Life Insurance Coverage

    Seven issues to consider when buying life insurance to ensure the coverage is tailored to meet your personal financial situation.
  6. Insurance

    Insurance Coverage: A Business Necessity

    Don't go to work without this policy in place - especially if your work is in your home.
  7. Financial Advisor

    Group Term Life Insurance: What You Need to Know

    Is group term life insurance really a good deal? What you need to know about employer-sponsored group term life insurance coverage.
  8. Financial Advisor

    Who Should Buy a Guaranteed Issue Life Insurance Policy?

    Guaranteed issue life insurance policies have added costs and reduced benefits that make them suitable for only a limited pool of buyers.
  9. Insurance

    Top Tips for Cheaper, Better Car Insurance

    Accident, theft, vandalism - make sure your coverage will protect you when you need it most.
  10. Insurance

    What Is and Isn't Covered by Homeowners Insurance

    Understanding what your insurance covers can be confusing. Learn what almost all insurance policies have in common so you're prepared if disaster strikes.
RELATED FAQS
  1. What are some examples of industries that practice price discrimination?

    Understand the various types of insurance coverage offered in the insurance marketplace, and learn why each policy should ... Read Answer >>
  2. How does the 80% rule for home insurance work, and how do capital improvements affect ...

    The 80% rule refers to the fact that most insurance companies will not fully cover the cost of damage to a house due to the ... Read Answer >>
  3. Can my insurance company refuse me coverage?

    Insurance isn't always as straightforward as other products. Insurers can deny coverage in many different instances:Non-Renewal ... Read Answer >>
  4. Why is my insurance premium so high/low?

    Insurance premiums can be affected by many factors including: type and amount of risk size of deductible amount of coverage ... Read Answer >>
Hot Definitions
  1. Taxable Income

    Taxable income is described as gross income or adjusted gross income minus any deductions, exemptions or other adjustments ...
  2. Chartered Financial Analyst - CFA

    A professional designation given by the CFA Institute (formerly AIMR) that measures the competence and integrity of financial ...
  3. Initial Coin Offering (ICO)

    An Initial Coin Offering (ICO) is an unregulated means by which funds are raised for a new cryptocurrency venture.
  4. The Bernie Madoff Story

    Bernie Madoff ran a multibillion-dollar Ponzi scheme that is considered the largest financial fraud of all time.
  5. Pyramid Scheme

    An illegal investment scam based on a hierarchical setup. New recruits make up the base of the pyramid and provide the funding, ...
  6. Ponzi Scheme

    A fraudulent investing scam promising high rates of return with little risk to investors. The Ponzi scheme generates returns ...
Trading Center