The practice of applying an insurance policy’s effective date to a time in the past is generally prohibited within the car insurance industry. This means the coverage would begin prior to the date the policy was purchased. For example, attempting to secure insurance today, with the coverage starting last week, typically is not an option.
The prohibition against retroactive application of coverage exists to prevent individuals from purchasing insurance only after an accident has occurred. Allowing individuals to obtain coverage after an incident and have it apply to that past event would undermine the fundamental principles of insurance, which rely on risk assessment and premium calculation prior to any loss. Such a practice would lead to widespread fraud and destabilize the insurance market.
