Claims-Made Policy

What is a claims-made policy?

A claims-made policy covers claims reported during the policy period, regardless of when the underlying incident occurred, subject to a retroactive date. Most professional liability insurance uses claims-made coverage. This differs from occurrence policies that cover incidents during the policy period regardless of when claims are reported. Understanding this distinction is essential for maintaining continuous protection.

The retroactive date

Claims-made policies include a retroactive date. Only incidents occurring after this date are covered, even if the claim is made during the current policy period. The retroactive date typically matches when you first obtained claims-made coverage. Switching insurers can reset this date, leaving prior work uninsured. Maintain continuous coverage to preserve your retroactive date and protect all past work.

Advantages and disadvantages

Claims-made policies often cost less initially because they only cover claims made during the policy period. However, you must maintain continuous coverage or purchase tail when coverage ends. Occurrence policies cost more upfront but provide permanent coverage for work performed during the policy period. For professional services, claims-made is standard, so plan for tail coverage as part of your overall insurance strategy.