Occurrence vs. Claims-Made Insurance Policies: Understanding the Key Differences
What is an Occurrence Policy?
An occurrence policy provides coverage for claims that happen during the policy period, regardless of when the claim is reported.
What is a Claims-Made Policy?
A claims-made policy provides coverage for claims that are made during the policy period, making it crucial to maintain continuous coverage.
Key Differences Between Occurrence and Claims-Made Policies
Coverage Period
- Occurrence: Covers claims that occur during the policy period, even if reported later.
- Claims-Made: Covers claims made during the policy period.
Continuous Coverage
- Occurrence: No need for continuous coverage.
- Claims-Made: Continuous coverage is essential to maintain protection.
Reporting Timelines
- Occurrence: No specific reporting deadline.
- Claims-Made: Claims must be reported within the policy period.
Which Policy Type is Right for You?
The best policy type depends on your specific needs and risk profile.
Consider an occurrence policy if:
- You want coverage for events that may not be discovered until after the policy period ends.
- You anticipate a long latency period between the occurrence and reporting of claims.
Consider a claims-made policy if:
- You want to avoid coverage gaps due to policy lapses.
- You operate in an industry with short latency periods for claims.
Conclusion
Understanding the differences between occurrence and claims-made policies is essential for making informed insurance decisions. By carefully considering your coverage needs, you can select the policy type that best protects your interests.
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