Claims-Made vs Occurrence Policies: Why the Difference Matters
Do you know the difference of claims-made vs occurrence insurance? If not, keep reading because the difference can determine whether you receive payment for a claim.
If you already have a general understanding of occurrence or claims-made insurance, keep reading for a quick refresher on the topic and an introduction to how you can keep track of policies.
Do You Need Occurrence or Claims-Made Policies?
An occurrence policy affords lifetime coverage to the policyholder for any claims that occur during the policy period. A claims-made insurance policy covers claims that occur and are made during the life of the insurance policy unless you buy tail coverage.
Let’s dive deeper into each one to see which is the best fit for you and your business.
What is an Occurrence Policy?
With an occurrence policy, coverage applies to any claim that occurs during the life of the policy, no matter how far down the line the claim gets made. This means if an accident happens while the policy is in place, but a claim is not made until after the policy expires, you’re still covered.
If the accident being claimed happens during the active policy dates, you’re all good to make the claim!
What is a Claims-Made Policy?
To get coverage from a claims-made policy an accident must occur and be claimed during the active dates of the policy for insurance to kick in and cover costs.
If an accident occurs and the insurance policy expires before a claim is made no coverage will be awarded for the claim.
What is Claims-Made Policy Tail Coverage?
Claims-made policy tail coverage or extended reporting period (ERP), coverage is an addition to a claims-made policy.
This is an addition bought after a claims-made policy expires and a claim needs to be made. Tail policies last indefinitely, so claims can be made for any accidents that happen during the original policy dates.
What is the Difference Between Claims-Made & Occurrence?
It’s important to keep in mind that an occurrence policy is more expensive than a claims-made policy. Occurrence policies are more expensive because there’s no time-limit on the claims reporting period.
The coverage in each of these policies is the same; the only difference lies in the reporting period available for claims.
Do I Need Claims-Made or Occurrence Coverage?
If you work in an industry where it’s common for claims to arise years after a policy expires, an occurrence policy is the best choice for you.
But, if you deal with claims that are made immediately after an accident occurs, you’ll be fine with claims-made coverage.
Use SmartCompliance to Keep Track
With SmartCompliance, you can track all your insurance policies and certificates from vendors you work with to ensure compliance is met.
Keeping track of when policies expire and need renewal is important, so using SmartCompliance to keep track of expiration dates will save you time, money, and valuable resources.
Schedule a free product demo to see SmartCompliance in action and ask questions about how your business will benefit.