What is a claims-made policy?

Have you read our blog about occasion-based insurance policies? We briefly touched on claims-made policies in it, but we're not one to play favorites when it comes to insurance coverage. Let’s break this sometimes-complex policy down simply so you can think about what coverage like claims-made might mean for your business.

What is a claims-made policy?

A claims-made insurance policy kicks in coverage when a claim is filed and doesn’t hinge on when the event that caused the claim occurred. What matters is that your policy is active at the time you make the claim.

For example, if you find out today that your small business is being sued over an incident that happened two years ago and your claims-made policy is in good standing with premiums paid, the fact that the incident happened two years ago likely would not matter.

Errors and omissions, professional liability, and directors and officers are common types of insurance for claims-made policies.

While it can be a bit more complicated compared to occasion-based policies, this coverage is usually accompanied by lower initial premiums. That money-saving aspect might make it appealing for those who have a new business or work in a field where there is a likelihood of delay between when a claim event occurs and when the claim is filed (for example, a renovation or remodeling company).

Extend your protection with tail coverage

Unlike occurrence-based policies that protect you after your policy is over, a claims-made policy only protects you while the policy is active. But this doesn't mean you're in trouble once the policy expires, you could still be protected once the policy ends through an extended reporting period (also called tail coverage). An addition to the policy, tail coverage extends the amount of time you can report a claim after the policy expires. Most policies include this option, and the length of time varies from carrier to carrier.

Still have questions on the best coverage for your business? Find a UFG agent to speak with! Always keeping your best interests in mind, they would love to help answer any questions you might have and help make sure the coverage you have is adequately protecting your business. Start your search today.