Difference Between Claims-Made and Occurrence Policies

Difference Between Claims-Made and Occurrence Policies These are two basic types of commercial liability policies: The primary difference between the two has to do with the coverage trigger, the event that initiates coverage. An occurrence policy is triggered by an injury that occurs while the policy is in effect. A claims-made policy is triggered by a claim that's filed during the policy period. Claims-Made Policy: -Triggers Coverage: When a claim is made during the policy period, regardless of when the incident occurred. -Coverage Duration: Only covers claims made during the active policy period and any extended reporting period specified in the policy. Example: You have a claims-made professional liability policy for 2 years with a 1-year extended reporting period. If a client sues you in year 3 for an incident during year 1, it's covered. However, any incidents after year 2, even if reported during the extended period, wouldn't be covered. Occurrence Policy: -Triggers Coverage: When an incident occurs during the policy period, regardless of when the claim is made. -Coverage Duration: Covers incidents that happen during the active policy period, even if the claim is made years later. Example: You have an occurrence-based general liability policy for 1 year. A customer slips and falls in your business during that year but files a claim 5 years later. The claim is covered because the incident happened during your policy period. Choosing Between Claims-Made and Occurrence Policies will depend on your specific needs and risk profile considering factors like: -Profession: Some professions have predictable claim timelines, making claims-made suitable. Others may have long-tail risks where occurrence offers better protection. -Claims History: Frequent claims might make occurrence more expensive due to higher risk. Budget: Occurrence typically costs more upfront, but offers broader coverage in the long run. -Future Plans: If you plan to retire or change careers, occurrence provides continuous protection for past incidents. #benewinsurance #insurtech #inclusiveinsurance #insurance #reinsurance #takaful