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When you get business insurance, you’ll either have a claims-made or occurrence policy. The choice affects your coverage, so it's important to know how they work.
At The Hartford, we offer both types of policies. We’re here to help you learn the difference between claims-made and occurrence insurance, so you can make the right decision for your business.
What Is a Claims-Made Policy?
Insurance policies are commonly written on a claims-made form. This means your insurer helps cover claims filed during your policy period.
There are two features of a claims-made policy that can affect how it covers claims:
Retroactive date: Your policy provides coverage if an incident occurs on or after a specified date. Let’s say you have professional liability insurance with claims-made coverage. Your policy starts on January 2020 and has a November 2019 retroactive date. If a client sues you in February 2020 for an event that occurred in December 2019, your insurer can help cover your costs because it happened after your retroactive date, and the claim is reported during your policy period.
Extended reporting period: This helps cover claims made during a specified time after your policy expires, and it generally lasts between 30 and 60 days. So, if your policy expires in December 2020, and you have a 60-day extended reporting period, your insurer can help cover claims filed in this window. This is also known as tail coverage.
It’s important to remember a claims-made policy covers you only if the claim:
- Is filed during your policy period or within your extended reporting period, and
- Is for a loss occurring on or after your retroactive date
What Is an Occurrence Insurance Policy?
An occurrence policy provides coverage for incidents that happen during your policy period, regardless of when you file a claim. These policies can be costlier than a claims-made policy because of how long coverage applies.
Let’s say your business has a commercial general liability insurance coverage written on an occurrence form. During your policy period, your customer breaks their arm after a slip and fall. However, they don’t file a claim until a year after your policy expires. Because they got hurt while your policy was in effect, the claim will still be covered.
Comparison of Claims-Made vs. Occurrence
To determine whether you need a claims-made policy or an occurrence policy, you have to decide which one makes the most sense for your business. Since every business is unique, what works for one company may not work for yours.
You’ll likely pay more to get insurance on an occurrence form. The cost difference can be a factor in your decision. And, if you’re a newer business, getting insurance with a claims-made policy may be the best financial choice.
It’s important to understand how your insurance policies cover claims. So, if the unexpected happens, you’ll know you have the protection you need. We’re proud to be an insurance company that puts our customers first. Our team is here to help you any way we can, and we’ll explain everything in detail to give you the peace of mind you deserve.
With over 200 years of experience, we understand small businesses and know that each one has unique needs and goals. We're dedicated to getting you the right coverage, and our specialists can help answer any questions about claims-made and occurrence policies.