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Keeping old insurance policies - really?

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Companies often face a dilemma when relocating, merging or closing:

After years in business, insurance records can amass and nobody seems to know what to keep and what to toss. Next thing you know everything's going in the shredder. But shredding an old policy may be a costly mistake, believe it or not, and it's best to err on the side of caution. Having a central repository for all your insurance policies is prudent, especially in today's litigious environment.

As you review your policies, keep the following in mind:

  • Occurrence-based policies (i.e. commercial general liability) cover losses that occurred during the policy term, no matter when the claim is made. It is not uncommon for claims to occur years after the policy was in force. Occurrence-based policies may ultimately protect you from claims in the future that are unforeseeable today.
  • Claims-made policies (i.e. Directors & Officers Liability) cover claims that are made while the policy is in force and may also include a "tail" that extends coverage for a specific period after the policy expires. The tail only covers a claim if it results from a loss that occurred during the time when the policy was initially in force. The policy's coverage is based on when a claim is filed, not on the date when the loss occurred.
  • Build a checklist of the insurance coverage necessities that should be kept, including:
    • Images of policies and endorsements
    • Names of insurers
    • Description of properties and insureds
    • Names of individuals who procured the coverages

It is your responsibility to establish the existence of a policy if a claim is submitted. While insurance agents and brokers may retain copies of your policies, many only keep for a few years after you have ceased to be a client. If you don't want to keep all your policies, contemplate keeping all liability policies (i.e. general liability, auto liability, professional liability, workers' compensation and umbrella as well as others). On the other hand, property policies should be kept only if there is a pending claim, otherwise they may be discarded after the policy expires.

The good news is there are various electronic options for archiving and many record-retention systems can facilitate the storage, search and retrieval of these important documents.

At the end of the day, it's best to keep as many policies for as long as possible...as they could be a lifesaver for your business.

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