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Insurance 101
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Claims Made
Vs Occurrence Policies
There are two
primary forms of liability insurance policies - claims-made and
occurrence policies. Most professional liability insurance, including
directors and officers and employment practices liability insurance, is
written on a claims-made basis.
An occurrence policy obligates the insurance company to pay for claims
arising out of occurrences during the policy period regardless of when
the claim is reported. The policyholder is covered for any incident that
occurs during the term of the policy regardless of when the claim
arising from the incident is reported to the company. In some situations
the claim might be made many years after the incident occurred. This
leads to uncertainty for both the insured and the insurer.
A claims-made policy protects an insured against claims or incidents
that are reported while the policy is in force. Normally, a claims made
policy provides coverage for acts occurring prior to the claims-made
policy period. Coverage for acts occurring prior to the policy period is
called "prior acts coverage," and the period prior to the policy period
for which claims are covered is called the prior acts period. Prior acts
coverage is usually only provided when a claims-made policy has been in
force immediately prior to the current claims-made policy on a basis
consistent with the prior policy. Prior acts coverage is defined as
"full prior acts", covering acts occurring at any time prior to the
current policy period, or is defined by a "retroactive date." When a
retroactive date is used, prior acts coverage is provided from the
retroactive date to the current policy period.
"Tail coverage," also called an "extended reporting period," provides
protection for claims that are filed after a claims-made policy has been
non-renewed or canceled. This coverage is optional, and the need can
arise if the professional organization is acquired or goes out of
business, or a decision is made not to purchase insurance. The terms and
pricing for tail coverage vary greatly and are usually defined in the
policy. |
If you want a no obligation
insurance comparison, contact a professional at
Advanced
Insurance Services via email or Toll Free phone at 1-866-643-1557.
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