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    Claims-Made vs. Occurrence Insurance: Why It Matters

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    When purchasing an insurance policy for your small business, you’ll need to choose between occurrence-based and claims-made coverage. But what’s the difference between the two?

    As a small business owner, there’s a lot to consider when it comes to safely and effectively running your company. In addition to following standard safety regulations and implementing general risk management, finding the right professional liability insurance for your business can be just as important.

    Once you select the small business insurance policy that meets the needs of your company, you’ll also have to decide whether you’d prefer your coverage to be on a claims-made or occurrence basis.

    So, what’s the difference between these two ways to cover claims?

    In this article, we’ll go over occurrence coverage in comparison to claims-made policies. Read on to find out the pros, cons, and differences between these two types of liability coverage.

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    Occurrence Insurance

    What does occurrence coverage mean?

    An occurrence insurance policy provides coverage to the insured for incidents that take place during the policy period. While the event involved in the claim must have happened during this time, you can submit a claim after your policy has ended.

    This means that occurrence insurance offers lifetime coverage for events during the policy’s time frame, regardless of when the claim is reported. There is no expiration date.

    What types of insurance typically provide occurrence coverage?

    General liability insurance policies usually offer coverage on an occurrence basis.

    If you’re looking at claims-made vs. occurrence general liability insurance, consider that occurrence coverage is a good option for businesses that may face lawsuits or claims in the future, rather than right away.

    What are the pros of occurrence insurance?

    With a policy that provides coverage in occurrence form, you’ll have the peace of mind that your business will be financially protected long term.

    Your policy amount will also reset each year that you renew your insurance, regardless of whether you’ve submitted a claim or not. For example, if you have a policy for $2 million that gets paid out for a lawsuit, upon renewal, you will have another $2 million in coverage.

    What are the cons of an occurrence policy?

    This type of insurance typically costs more in premium payments, since it offers broader protection.

    Claims-Made Insurance

    What does claims-made coverage mean?

    Claims-made insurance covers incidents that take place and are filed within the period of the policy. This means that the insurance must be active at the time of the claim in order to receive coverage.

    What types of insurance typically provide claims-made coverage?

    Professional liability, errors and omissions, and directors and officers insurance are all common policies that often provide claims-made coverage.

    What are the pros of claims-made insurance?

    Claims-made policies are typically more affordable than occurrence insurance, with lower premium payments available.

    What are the cons of a claims-made policy?

    This type of policy can only provide coverage for incidents and claims made during the active policy period. Claims based on events that took place after this time would not be covered, nor would claims submitted after coverage has ended or been cancelled.

    You would also not have coverage for incidents during a time frame where you missed a payment and your policy had been cancelled by your insurance company.

    Finally, your coverage needs to last you the entire time of your policy. Unlike occurrence policies, this amount never resets, unless you increase your policy limit and add additional coverage. If you use it, it’s gone.

    APOLLO is here to help support you in finding the best coverage for your business venture. Start your online application today and get insured in the next 15 minutes.

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    Originally published May 25, 2022, updated August 25, 2023

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