What is the difference between a claims made and an occurrence based cover?

Claims-made coverage and occurrence-based coverage are two different types of liability insurance policies that provide coverage for different time periods and under different circumstances.

A claims-made policy covers claims that are made against the insured during the policy period, regardless of when the underlying incident occurred. This means that the policy will only cover claims that are made while the policy is in effect, regardless of when the incident took place. This type of policy usually has a retroactive date, which specifies the earliest date when a claim can be made for an incident.

In contrast, an occurrence-based policy covers incidents that occur during the policy period, regardless of when a claim is made. This means that the policy will cover any claims that arise from incidents that occurred while the policy was in effect, even if the claim is made years later. Occurrence-based policies do not have a retroactive date, as coverage is determined by when the incident occurred.

The main difference between claims-made and occurrence-based policies is how they determine when coverage applies. Claims-made policies cover claims made during the policy period, while occurrence-based policies cover incidents that occur during the policy period, regardless of when the claim is made.

It is important to note that claims-made policies typically have lower premiums than occurrence-based policies, as they provide coverage for a shorter period of time. However, claims-made policies may require the purchase of extended reporting period (ERP) coverage or tail coverage in order to cover claims made after the policy has expired or been cancelled. Occurrence-based policies do not require these additional coverages.