A claims-made policy is a type of insurance policy that provides coverage for claims that are made while the policy is in force, regardless of when the incident that caused the claim occurred. This is in contrast to occurrence-based policies, which cover claims that arise from incidents that occurred during the policy period, regardless of when the claim is made.
Some key features of a claims-made policy include:
- Coverage is triggered by claims made during the policy period: A claims-made policy provides coverage for claims that are made during the policy period, regardless of when the incident occurred. This means that if a claim is made after the policy period ends, it may not be covered.
- Retroactive coverage: To ensure that incidents that occurred before the policy period but result in claims during the policy period are covered, a claims-made policy may include retroactive coverage. This means that the policy covers claims for incidents that occurred before the policy period but were not known at the time the policy was purchased.
- Extended reporting period: To provide additional coverage for claims made after the policy period ends, a claims-made policy may include an extended reporting period. This allows policyholders to report claims for incidents that occurred during the policy period but were not reported until after the policy expired.
- Tail coverage: When a claims-made policy is cancelled or not renewed, the policyholder may purchase tail coverage, which provides coverage for claims that are made after the policy period ends but arise from incidents that occurred during the policy period.
For example, suppose a doctor has a claims-made malpractice insurance policy that covers claims made during the policy period. During the policy period, the doctor treats a patient who later files a malpractice lawsuit against the doctor. The policy will provide coverage for the lawsuit, even if the incident that led to the claim occurred before the policy period started. However, if the patient waits until after the policy period ends to file the claim, the doctor may not be covered unless they purchased extended reporting or tail coverage.
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