What is the difference between claims-made and occurrence policies?

The distinction between claims-made and occurrence policies is fundamental in understanding how insurance coverage works.

Claims-made policies are designed to cover claims that are made during the active period of the policy. This means that in order for a claim to be covered, it must be reported (or made) while the claims-made policy is in effect. If a claim is made after the policy has expired, it will not be covered, even if the incident that caused the claim occurred while the policy was in force.

On the other hand, occurrence policies provide coverage for incidents that occur during the policy period, regardless of when the claim is made. This type of policy protects the insured for claims arising from incidents that took place while the coverage was in effect, even if the claim is reported years later after the policy has expired.

Understanding this difference is crucial for selecting the appropriate type of insurance based on individual or business needs.