What is a claims-made policy?

A claims-made policy is a type of insurance that provides coverage only for claims made during the period the policy is active. This means that for a claim to be covered, it must be reported to the insurer while the policy is still in effect. This type of policy is often used in professional liability insurance, where claims might arise from incidents that occurred in the past but are reported later.

The defining characteristic of a claims-made policy is its focus on the timing of the claim rather than when the incident occurred. This is significant because it creates a clear period of liability for the insurer, allowing them to predict their risks more effectively. If an incident happened before the policy was active, but the claim is made after the policy has started, coverage would not apply.

This structure contrasts with occurrence-based policies, which provide coverage for incidents that happen during the policy period, regardless of when the claim is filed. Understanding the distinctions between these types of policies is vital for managing risks and ensuring proper coverage in the context of commercial property and liability insurance.