Two Ways to Trigger Coverage

Insurance policies respond to claims in two fundamentally different ways. Occurrence policies cover incidents that happen during the policy period, regardless of when claims are filed. Claims-made policies cover claims filed during the policy period, regardless of when incidents occurred. This distinction matters more than most business owners realize.

How Occurrence Policies Work

If you have an occurrence policy and an incident happens today, you are covered even if the claim is not filed for years. Your coverage at the time of the incident determines protection, not your coverage when the claim arrives.

General liability and most property policies are occurrence-based. Once covered, always covered for events during that period.

How Claims-Made Policies Work

Claims-made policies cover claims filed while the policy is active, but only for incidents that occurred after your retroactive date. If you cancel or switch policies, you lose protection for future claims about past incidents unless you purchase tail coverage.

Professional liability, employment practices liability, and directors and officers coverage are typically claims-made.

Why This Matters

Claims-made coverage creates continuity requirements. Gaps in coverage or switching carriers without proper arrangements can leave past work unprotected. This matters most for professional services where claims often emerge years after the work was performed.

Maintaining Protection

With claims-made coverage, maintaining continuous coverage is essential. Keep the same retroactive date when renewing or switching carriers. If you close your business, purchase tail coverage to protect against future claims from past work.