Claims-Made vs. Occurrence Policy (2024)

FAQs

Claims-Made vs. Occurrence Policy? ›

When an occurrence policy expires, the premiums stop but the coverage continues. A claims-made policy covers claims that occur, are made against you and reported during the policy period. The incident must take place after you purchase coverage.

When an occurrence policy expires, the premiums stop but the coverage continues. A claims-made policy covers claims that occur, are made against you and reported during the policy period. The incident must take place after you purchase coverage.

Claims-made coverage is portable. You can take the coverage from one insurance company to another. The advantage to an occurrence policy is its permanence. The period of time you are insured under an occurrence policy is protected forever by the policy you had that year.

Retroactive Coverage: A claims-made policy may have a retroactive date that determines when claims will not be covered. This means that claims arising from events that occurred prior to the retroactive date will not be covered by the policy. An occurrence policy, on the other hand, does not specify a retroactive date.

A claims-made policy is a type of insurance that only covers claims while it's active. If a client lets their claims-made policy lapse before reporting an incident, the insurer won't recognize the claim.

1. Keep in mind that as soon as you buy a Claims-Made insurance policy the clock starts ticking for that tail insurance. If you only carry the Claims-Made policy for 1 year and then want to switch to Occurrence, you can do so – but you have to buy tail for that 1 year that you carried the Claims-Made policy.

Sheila purchases an insurance policy for the one year that she's working for her client. With an occurrence policy, all acts or incidents that take place during the policy period and her contract period would be covered. Even if the client made a claim against Sheila years later, her policy would cover her.

A retroactive date is a provision found in many (although not all) claims-made policies that eliminates coverage for claims produced by wrongful acts that took place prior to a specified date, even if the claim is first made during the policy period.

In the case of a claims-made policy, however, determination of coverage is triggered by the date you first became aware and notify the insurer of a claim or potential claim. The insurer's policy in force on the date you became aware and give notice is the insurer who must defend and settle the claim.

Do you need tail coverage for claims-made policy? ›

Tail coverage only applies to a claims-made policy. It extends the amount of time a claim can be brought against you and reported. Because it doesn't matter when a claim gets filed with occurrence insurance, as long as the loss occurred during your policy period, tail coverage isn't necessary.

Most general liability insurance policies for businesses are occurrence based policies, while errors and omissions (E&O) coverage is typically claims made.

There are two types of property and casualty insurance policies: a claims-made policy and an occurrence policy. It's important to understand the basics of each since the coverage type determines: Whether or not your policy will respond to a claim.

A claims-made policy only covers those that occur and are reported within the policy's timeframe, unless tail coverage is also purchased. An occurrence policy provides lifetime coverage for incidents that take place during a policy period, regardless of when the claim is reported.

Insurance companies commonly write policies on a claims-made form. This means your insurer helps cover claims filed during your policy period. There are two features of a claims-made policy that can affect coverage: Retroactive date: Your policy provides coverage if an incident occurs on or after a specified date.

D&O insurance works by reimbursing defense costs, settlements, and awards resulting from claims made by shareholders, third parties, or regulators for alleged wrongful acts. It also extends coverage to the company itself if it faces litigation.

The occurrence and claims-made CGL forms contain basically the same coverages. The difference is in how the coverage begins. This is called the trigger. Occurrence form requires only that the incident occur while the policy is in force and the claim may be filed anytime, even after the policy has expired.

The primary difference between a claims-made form and a per occurrence form is: Occurrence and claims-made are different because of when the coverage is triggered. Claims-made, you have to have insurance when the claim is made. Occurrence covers you for forever as long as you had the policy when you first did the work.