Sep 4, 2013

Occurrence vs Claims Made Policies

When it comes to reporting claims not all insurance policies are created equal.

When you purchase a professional liability policy for your business it's important to understand the difference between an Occurrence Policy and Claims Made policy because the difference can result in a claim being denied.

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Occurrence Polices
This type of insurance policy provides better coverage. It covers claims that arise during the policy period - regardless when a claim is reported. These policies are more expensive than Claims Made because the coverage essentially lasts forever for claims made during the period you had coverage.

Example
  • Policy Starts - Jan 1, 2013
  • Policy Ends - Dec 31, 2013
  • Incident Occurs - Mar 15, 2013
  • Claim Filed - Jun 1, 2015
  • COVERED

Claims Made Policies
As the name indicates, Claims Made Policies provide coverage for claims made in the period the policy is in force. Once your coverage ends any claims that are not reported to the insurance company during the coverage period will not be covered.

What this means to the business owner is that there is a risk of an unknown or unreported claim being made long after the policy period ends and not being covered.

Example #1
  • Policy Starts - Jan 1, 2013
  • Policy Ends - Dec 31, 2013
  • Incident Occurs - Mar 15, 2013
  • Claim Filed - Jun 1, 2015
  • NOT COVERED
Example #2
  • Policy Starts - Jan 1, 2013
  • Policy Ends - Dec 31, 2013
  • Incident Occurs - Mar 15, 2013
  • Claim Filed - Nov 5, 2013
  • COVERED

Conclusion
There is nothing wrong with a Claims Made policy but you need to make sure any incidents that occur during the policy period are filed with the insurance company. An Occurrence Policy, although a bit more expensive, is the safer bet.