If you’re looking to purchase insurance coverage for the first time, you likely have a good idea of what you need in terms of policy limits, specific subcoverages, and policy duration (though if you need more guidance on the subject, check out our deep dive on General Liability for a crash course!).
You may even be familiar with the importance of specific policy inclusions like the waiver of subrogation.
But there’s one detail that often slips by even the most informed first-time insurance buyers: the difference between claims made and occurrence policies, a crucial distinction when it comes to the timeline for reporting a claim. If this type of granular insurance terminology has you running for the door, take heart: we’ve laid out the essentials in layman’s terms below.
What is an Occurrence Policy?
The difference between claims made and occurrence insurance policies comes down to one important detail: whether a claim that’s reported outside of the policy period is covered.
Under an occurrence insurance policy, you are covered for incidents that occur when the policy is in effect, even if the claim is made after the policy period has ended.
What is a Claims Made Policy?
A claims made policy, on the other hand, only covers claims reported to the insurance carrier when the policy is in effect. This means two criteria must be met for your coverage to apply:
1) You have an active insurance policy in place when the claim is made.
2) You have continually renewed or extended the policy from the time the incident occurred to the time the claim is made.
It is important to note that many claims made policies are “claims made and reported,” meaning that the claim must both be made and reported to the insurer within the policy period. Technically these can be different dates, as there could be some delay between the lawsuit being brought and the insured reporting it to the carrier.
Insurance policy does not need to be active when the claim is made
Claims made after the policy period has ended are covered
Products and completed operations coverage is included as long as the occurrence takes place during the Exposure Period
Coverage arranged by Thimble falls under this category
Incident must occur during the policy period
Claims can be made if the policy has been continually renewed or extended from the time the incident occurred
Insurance policy must be active at the time the claim is made
Claims made after the policy period has ended are not covered
Products and completed operations coverage is not included
Coverage arranged by Thimble does not fall under this category
Occurrence and Claims Made Insurance in Action
Here’s an illustration of the key difference between occurrence and claims made policies:
Say that you are a musician hired to play at a holiday office party in December 2018. You have a monthlong policy in place for December to cover you for any incidents that may occur during this timeframe. During the party, one of the guests trips over your microphone cord and breaks their ankle, requiring medical attention. A month later, in January 2019, they sue you for this incident.
Under some claims made policies, you would not be covered for this claim, because your coverage had terminated before the lawsuit was filed. While many claims made policies come with automatic extended reporting periods, in which case a claim can be made after the coverage period ends, this can often become cost-prohibitive if you are looking to purchase longer-term coverage.
Under an occurrence policy, on the other hand, your coverage would take effect: this type of coverage applies to incidents that occur during the policy period, regardless of when the claim is made.
Which Coverage Should I Choose, Claims Made or Occurrence?
The type of coverage that is best-suited to your needs will vary based on the specific risks of your profession. It is our belief that occurrence policies tend to be more favorable to the insured in the categories of work that we cover, and because of this, the General Liability policies arranged by Thimble are occurrence, not claims made.
Additionally, protection for covered claims that arise after the policy period from work completed during the policy period—also known as products and completed operations coverage—is provided as long as the occurrence takes place before the Exposure Period ends. The work must have been completed during the policy period for coverage to apply.
Here’s an example of how products and completed ops coverage would work for a contractor: say that you build a deck during a seven-day policy period. Three months after the policy period ends, the deck collapses and someone breaks their leg and sues you. The policy responds, because the occurrence took place after the policy period had ended but while the Exposure Period was still active.
Now that you’re officially an expert on the finer points of General Liability coverage, it’s time to get insured! You can get coverage by the hour, day, or month with Thimble’s on-demand insurance coverage designed to meet the needs of small business owners and independent workers. Get an instant quote and get going!
Our editorial content is intended for informational purposes only and is not written by a licensed insurance agent. Terms and conditions for rate and coverage may vary by class of business and state.