What is the difference between an occurrence policy and a claims-made policy?

An occurrence policy covers incidents that happen during the policy period, regardless of when the claim is made. This means that if an event occurs while the policy is active, the insured is protected against claims arising from that event, even if the claim is reported years later. This type of policy is most beneficial for long-tail risks where claims may take time to develop or be reported.

In contrast, a claims-made policy only covers claims that are made during the policy period for incidents that occur after the retroactive date specified in the policy. This means that both the timing of the claim and when the incident occurred are critical factors for coverage under a claims-made policy.

This fundamental difference makes the occurrence policy more straightforward in terms of coverage, especially for risks that may take time to manifest into claims. Understanding this distinction is crucial for individuals in the insurance field, as it impacts risk management and coverage selection.