When purchasing liability insurance, one of the most critical things to understand is whether the policy is written on an 'occurrence' or 'claims made' basis. This impacts what claims will be covered and when. As a business owner, you need to know what type of cover you have, to ensure you are protected when something goes wrong.
An 'occurrence policy' covers incidents that happen during the policy period, regardless of when a claim is made. So if a customer slips and falls in your store while your occurrence policy is active, any claim would be covered, even if filed years later.
With a 'claims made' policy, cover depends on when the claim is made against you, not when the incident took place. So using the example above, if your customer filed a claim after your claims made policy expired, you would not have cover.
Key differences include:
Occurrence policies cover incidents happening during the policy period. Claims made cover claims filed during the policy period. This is very common for public and products liability policies.
Claims made policies often have retroactive dates limiting cover for older incidents and stricter reporting requirements. This is very common for professional liability and professional indemnity policies.
Claims made policies need extra cover called 'run-off' insurance, to protect against claims after the policy ends. Occurrence policies do not.
When buying insurance, most business owners prefer occurrence-based coverage, but certain policies like management liability may only be offered on a claims-made basis. Work with us at Keep Insurance Brokers to understand your options.