What’s the difference between “claims made” and “claims occurring”? It’s a question that gets asked a lot by business owners, and it’s important to understand the difference before purchasing business insurance. Otherwise how do you know what exactly you’re covered for?
What does “Claims Made” mean?
A “Claims Made” insurance policy provides coverage when a claim is made, regardless of when the claim incident took place.
With “Claims Made” policies, there is usually a retroactive date which is the date when cover was first incepted. When you renew your insurance policy, this date should be carried forward to the same date each year. All work carried out since the retroactive date is covered by your “Claims Made” insurance policy, so any claims made during that time period is covered.
If you fail to renew or replace a “Claims Made” policy, then you will not be covered for any new circumstances that may arise. Once cancelled, the “Claims Made” policy’s historic cover no longer has any worth, as you are only insuring for that twelve month window (the length of period which a typical insurance policy is valid for) and the policy is no longer in force. So to have any form of continuing insurance protection, you need to renew or replace your “Claims Made” policy as soon as it expires.
Typically, Professional Indemnity Insurance policies will be on a “Claims Made” basis.
What does “Claims Occurring” mean?
A “Claims Occurring” or “Claims Occurrence” policy will cover claims that were incurred during the policy period, regardless of when the claim was made, even if the claim is filed after the policy has been cancelled. With this type of policy basis, unlike with the “Claims Made” policy, you are insuring for a specific period of time for life. Meaning that even if you don’t renew or replace the insurance cover, you are still covered for the work that was carried out during the lifetime of your “Claims Occurring” policy. However, with “Claims Occurring”, if an incident were to occur during a period of time in which you were not covered by insurance, then there can be no claim.
What’s the difference?
A “Claims Made” policy provides coverage for claims when the incident is reported. A “Claims Occurring” policy provides coverage for when the incident occurred.
An example would be if there was fault in work that you carried out ten years ago, but it has only just been reported today. If, at the time, you had a “Claims Made” policy in place but the policy has since not been renewed then you are not covered by insurance. However, if you had a “Claims Occurring” policy in force at the time the work was carried out then you can report the claim to the insurer who held that policy at the time, even if you have switched insurer several times since then.
If given a choice between a “Claims Occurring” and a “Claims Made” basis, with all other things equal, “Claims Occurring” would be the ideal preference. Though this isn’t always possible.