An Occurrence Policy covers an event that occurs during the policy period, regardless of when the claim is filed. The policy just needs to be active on the date of the incident. A Claims-Made Policy covers a claim that is filed and reported during the policy period, as long as the incident also happened on or after a specified "retroactive date" (if one exists). The policy must be active when the claim is made. You can explain the difference between occurrence and claims-made policies to clients by focusing on a single point: when the policy must be active for a claim to be covered. An Occurrence Policy covers an event that occurs during the policy period, regardless of when the claim is filed. The policy just needs to be active on the date of the incident. A Claims-Made Policy covers a claim that is filed and reported during the policy period, as long as the incident also happened on or after a specified "retroactive date" (if one exists). The policy must be active when the claim is made. Example Imagine a business owner has a professional liability policy from January 1, 2024, to January 1, 2025. Scenario 1: Occurrence Policy A client is harmed by the business owner's service on March 15, 2024. The business owner cancels their policy on December 31, 2024. The client files a claim on February 1, 2025. The claim is covered because the policy was active on the date the incident occurred (March 15, 2024). Scenario 2: Claims-Made Policy A client is harmed by the business owner's service on March 15, 2024. The business owner cancels their policy on December 31, 2024. The client files a claim on February 1, 2025. The claim is not covered because the policy was not active on the date the claim was made (February 1, 2025). To be covered, the business owner would have needed to purchase an extended reporting period endorsement, often called "tail coverage."
When explaining insurance policies to clients, I focus on clarity and practical examples. Occurrence policies cover claims arising from incidents that happen during the policy period, regardless of when the claim is actually filed. In contrast, claims-made policies cover claims only if they are both made and reported while the policy is active. A simple way I illustrate this is with a consulting scenario: Suppose a consultant gives advice in 2024. If they have an occurrence policy in 2024, and a claim arises in 2026, the policy still covers it because the incident occurred during the policy period. With a claims-made policy, coverage would only apply if the consultant had an active claims-made policy when the claim was filed in 2026 — so gaps in coverage could be a concern. I often recommend occurrence policies for clients who want long-term peace of mind, especially when liability may arise years after services are rendered. Claims-made policies can be more cost-effective and appropriate for clients with stable risk profiles who actively maintain continuous coverage. The key is helping clients understand both timing and risk implications so they can make informed choices.
I usually start by saying an occurrence policy covers incidents that happen during the policy period, even if the claim is filed years later. A claims-made policy, on the other hand, only covers claims that are both made and reported while the policy is active. An example I use: imagine a therapist with an occurrence policy practicing in 2021. If a client files a lawsuit in 2023 for something that happened in 2021, they're still covered. With a claims-made policy, that same 2023 lawsuit would only be covered if the therapist kept their policy active (or purchased tail coverage) through 2023. I tell clients that occurrence policies offer more peace of mind but are often more expensive, while claims-made policies can work well for professionals who expect shorter coverage needs or plan to manage costs.