Claims-Made Vs. Occurrence Policies: What Coverage Is Right For You?

Owners of real estate businesses, general contracting firms, landscaping companies, and other organizations often purchase commercial general liability (CGL) insurance as protection against unforeseen incidents.

However, not all coverage is created equal.

There are two types of liability coverage—claims-made and occurrence—and each comes with its own advantages and disadvantages.

This guide breaks down both so you can ensure coverage when you need it and build safer business connections.

Key Takeaways:

1. A claims-made policy only covers those that occur and are reported within the policy's timeframe, unless tail coverage is also purchased.
2. An occurrence policy provides lifetime coverage for incidents that take place during a policy period, regardless of when the claim is reported.

What Are Claims-Made Policies?

Claims-made insurance policies are a specific type of coverage where protection is provided for claims made and reported to the insurer during the policy period. Unlike occurrence-based policies, which cover events that happen during the policy period, claims-made policies require both the alleged incident and the claim to occur within the policy's timeframe.

These policies often have a retroactive date. Claims arising from incidents before this date may not be covered. Additionally, if a policy is canceled or a premium isn't paid, any claim that comes through will not be covered—even if the incident occurred during the policy period.

Example: Bob the businessman purchased claims-made insurance in 2016 and continued coverage through 2018, then canceled it. He does not purchase any extension—or, tail coverage—to extend its original limits. In 2019, Bob was sued for an incident that occurred in 2017. Since the claims-made policy is no longer in effect and he did not purchase tail coverage, Bob is the liable party—meaning he is obligated to pay for damages, as his former insurance carrier does not cover it.

How Can Tail Coverage Enhance Your Policy?

Also known as an extended reporting period (ERP), tail coverage is an additive option that extends the limits of claims-made coverage indefinitely, and becomes available only after a policy has been terminated.

This endorsement protects policyholders from past incidents and covers claims filed after expiration or cancellation.

Example: Bob the businessman purchased claims-made insurance in 2016 and continued coverage through 2018, then canceled it. He then adds tail coverage. In 2019, Bob was sued for an incident that occurred in 2017. Since he was continuously covered at the time of the incident and purchased extended coverage, his old insurance carrier is still liable to pay for the suit, even though the original policy is no longer in effect.

What Are Occurrence Policies?

Occurrence policies cover events happening during the policy period, regardless of when claims are filed. Unlike claims-made policies, the trigger for coverage is the occurrence of an event rather than the timing of the claim report.

Occurrence policies have no retroactive date, providing simplicity and long-term clarity regarding the incidents covered. This type of insurance will provide coverage even if the claim is filed after cancellation, as long as the incident occurred within the time frame set by the initial policy. These are commonly used in general liability insurance, such as commercial general liability (CGL) policies, as well as in some other liability insurance categories.

Example: Bob the business owner purchased an occurrence policy in 2016 but switched to a new form of coverage in 2021. Bob got sued in 2023 for an incident that occurred in 2018. In this case, Bob is still covered by his original occurrence policy because it was active at the time of the incident.

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