Occurrence vs. Claims-Made Insurance: Why It Matters | Insureon (2024)

FAQs

Why is occurrence better than claims made? ›

The advantage to an occurrence policy is its permanence. The period of time you are insured under an occurrence policy is protected forever by the policy you had that year. You do not need to renew or buy a tail when you leave.

Insurance companies commonly write policies on a claims-made form. This means your insurer helps cover claims filed during your policy period. There are two features of a claims-made policy that can affect coverage: Retroactive date: Your policy provides coverage if an incident occurs on or after a specified date.

Occurrence policies provide the best protection and, though somewhat more expensive than claims made policies, offer long-term peace of mind. Unfortunately, they are becoming increasingly hard to find. Claims made coverage, by contrast, will only apply if the claim is made while the policy is still in effect.

The most obvious benefit of an occurrence policy is that it offers long-term protection. As long as coverage is in place when the incident occurred, it's possible to make a claim on that period years into the future. Another advantage is that occurrence policy costs tend to be fixed.

Premium Cost: Typically for the first five years of coverage, claims-made policies tend to be less expensive than occurrence policies. However, this price typically tends to even out with occurrence policies as time goes on and your business faces more exposures.

Key Takeaways: A claims-made policy only covers those that occur and are reported within the policy's timeframe, unless tail coverage is also purchased. An occurrence policy provides lifetime coverage for incidents that take place during a policy period, regardless of when the claim is reported.

In the case of a claims-made policy, however, determination of coverage is triggered by the date you first became aware and notify the insurer of a claim or potential claim. The insurer's policy in force on the date you became aware and give notice is the insurer who must defend and settle the claim.

A claims-made policy refers to an insurance policy that provides coverage when a claim is made against it, regardless of when the claim event occurred. A claims-made policy is a popular option for when there is a delay between when events occur and when claimants file claims.

Because the acts taking place during an occurrence policy are normally covered regardless of when the 'claim' is made, coverage for acts taking place during the policy period remains in place even after the occurrence policy expires or a switch is made to a claims-made policy.

Does claims made need tail coverage? ›

Tail coverage only applies to a claims-made policy. It extends the amount of time a claim can be brought against you and reported. Because it doesn't matter when a claim gets filed with occurrence insurance, as long as the loss occurred during your policy period, tail coverage isn't necessary.

Essentially, for a claim to be considered for coverage, an occurrence-based policy needs to be active when the act or incident occurs; claims made policies have to be active when the claim is made.

Your insurance policy's per-occurrence limit is the maximum amount of money you'll get to cover a single incident. In comparison, your policy's aggregate limit is the highest amount of money the insurance company will pay you for all claims made during your policy period (usually one year).

The term "occurrence" encompasses more than just an accident because accident is narrower in scope than occurrence. This can be seen in those cases decided before the occurrence wording was adopted. Accident, according to these cases, did not include coverage for damage occurring over time.

Key Takeaways: A claims-made policy only covers those that occur and are reported within the policy's timeframe, unless tail coverage is also purchased. An occurrence policy provides lifetime coverage for incidents that take place during a policy period, regardless of when the claim is reported.

A “Claims Made” policy provides coverage for claims when the incident is reported. A “Claims Occurring” policy provides coverage for when the incident occurred. An example would be if there was fault in work that you carried out ten years ago, but it has only just been reported today.

Claims-Made policies provide coverage for 'claims' only when BOTH the alleged incident AND the resulting 'claim' happen during the period the policy is in force! Switching from an "Occurrence" to a "Claims Made" form is the least perilous change.

A per occurrence deductible is like most auto or homeowners insurance you might be familiar with; you pay the $500, and that's the max you'll pay when something happens. But if your deductible is per claim, that means a separate deductible gets applied to every claim filed in a single occurrence.