What distinguishes claims-made policies from occurrence policies?

Claims-made policies are distinct in that they provide coverage for claims based on the timing of when the event giving rise to the claim actually occurred, rather than when the claim itself is reported. This means that if an incident took place during the policy period, it will be covered by the claims-made policy, provided that the claim is reported within the specified reporting period defined by the policy terms.

In contrast, occurrence policies cover incidents based on when they occur, regardless of when the claim is reported. This can lead to greater uncertainty for insurers with occurrence policies since they may have to account for claims years after the policy period has ended, as long as the event occurred during that period.

In this context, understanding the nuances between claims-made and occurrence coverage is critical for effective risk management and ensuring that clients are aware of how their policies operate, particularly regarding policy triggers and coverage limits.