Claims-Made Policy vs Occurrence-Made Policy
The main difference between a claims-made policy and an occurrence-made policy is the timing of which coverage is effective for.
An occurrence-made policy, pays when the event takes place. For example, your auto insurance pays when a car accident occurs. Other examples of occurrence-made policies would be things like home owners or health insurance. These types of policies can be canceled anytime during the policy, unlike a claims-made policy.
A claims-made policy is structured to cover an event that previously took place. Often the event which causes the claim, happened years before the claim is made. For example, say an estate planning attorney writes a defective trust and delivers it to a client, the client dies ten years later and that’s when the claim is made and the mistake is found, but the actual error happened ten years before. The policy that you have in place today is what will pay on that claim, not the policy you had ten years ago.
Claims-made policies include a retroactive date, otherwise known as a prior acts date, which is the look-back period attached to the policy. This is the earliest date that injury or damage may occur to receive coverage. For example, a policy set from January, 1st 2020 to January 1st, 2021, with a retroactive date of Jan 1st, 2000. That means anything that happened from January 1st, 2000 up to current, is covered under that policy.
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