Claims-Made Policy

What Is a Claims-Made Policy?

A claims-made policy alludes to an insurance policy that gives coverage when a claim is made against it, paying little mind to when the claim event happened. A claims-made policy is a famous option for when there is a deferral between when events happen and when claimants file claims. Be that as it may, the policy just covers claims made while the policy is active. Businesses frequently carry claims-made policies or occurrence policies, which expand coverage for claims made on inactive policies on the off chance that claim events happened when the policies were active.

Key Takeaway

• A claims-made policy is an insurance policy that covers an insured for claims on active policies, paying little mind to when the claim event happened.
• Businesses as a rule carry a claims-made or an occurrence insurance policy.
• A claims-made policy is an ideal option when there is a probability of postponements between when claim events happen and when claims are filed.
• Some insurance companies offer limited forms of the claims-made policy, known as the claims-made and reported policy, which covers claims made against the insured and reported inside a policy period.
• Occurrence policies cover the insured for claim events happening during the life of the policy or a specific period, even on the off chance that a claim is filed on an inactive policy.

Understanding Claims-Made Policies

A claims-made policy is a type of insurance policy most usually used to cover the risks associated with business operations. For instance, these policies are in many cases used to cover the potential for botches associated with errors and omissions (E&O) in financial statements. They are likewise used to cover businesses from claims made by employees, including wrongful termination, lewd behavior, and discrimination claims.

Claimants might make claims against a policy months after the claims' event happens. This type of liability is alluded to as employment rehearses liability and may likewise cover the activities of directors and officers of the business.

Insurance companies may likewise offer claims-made and reported policies, which most see as less alluring than a standard claims-made policy since claims must be reported during the policy period to be covered. This decreases the amount of time that a business can hope to be covered, which can be a problem in circumstances when numerous months pass between the claim event and the claim filing.

Claims-Made versus Occurrence

Virtually all liability policies fall into one of two categories: claims-made or occurrence.

A claim made while the policy is in force triggers coverage for a claims-made policy. The insurance company is committed to shield the policyholder and pay for the claims. The insurance policy will remember a predetermined period for which coverage applies, and any claims made during that time are covered under the policy. This type of trigger is not the same as an occurrence policy, which depends on the time in which the claim event happened since the occurrence policy trigger just covers claims that come from incidents that fell during a predetermined period. Occurrence policies don't indicate when the accident must happen, as long as the injury or damage it causes happens during the policy period.