What does the term "claims-made" policy mean?

A "claims-made" policy is specifically designed to provide coverage for claims that are made during the policy period, regardless of when the incident actually occurred that led to the claim. This means that in order for a claim to be covered, it must be reported to the insurer while the policy is active.

This type of policy is important for environments where claims may arise long after the event that caused them, such as in professional liability insurance. For example, if a professional provides a service and a client later alleges negligence, the claim must be presented while the relevant claims-made policy is still in force for the insurance to respond.

Understanding this mechanism is crucial because it differentiates claims-made policies from occurrence policies, which cover claims based on the timing of the incident itself rather than when the claim is made. This distinction aids insured parties in understanding their coverage needs and the timing associated with their insurance products.