Building Your Business Business Insurance Claims-Made vs. Occurrence Policies: What's the Difference? By Marianne Bonner Updated on September 13, 2022 Fact checked by Hans Jasperson Fact checked by Hans Jasperson Hans Jasperson has over a decade of experience in public policy research, with an emphasis on workforce development, education, and economic justice. His research has been shared with members of the U.S. Congress, federal agencies, and policymakers in several states. learn about our editorial policies Share Tweet Pin Email In This Article View All In This Article Occurrence Policies Claims-Made Policies Switching From a Claims-Made to Occurrence Policy Extended Reporting Periods Should You Buy a Claims-Made Policy? Frequently Asked Questions (FAQs) Photo: LG Trade / Getty Images Virtually all liability policies fall into one of two categories: occurrence or claims-made. An occurrence policy covers claims resulting from an injury or another event that occurs during the policy term. Coverage depends on the timing of the event. A claims-made policy covers claims that are made during the policy period. In this type of policy, coverage depends on the timing of the claim. Most liability policies purchased by small business owners are occurrence policies. An exception is errors or omissions policies, which typically apply on a claims-made basis. This article will describe the key differences between claims-made and occurrence policies. For the purposes of demonstration, it will compare the occurrence version of the ISO general liability policy with its claims-made cousin. Key Takeaways Occurrence policies cover claims in which the injury or damage occurred during your policy period, if even the claim is made after your policy ends.Claims-made policies require claims to be made while your policy is in effect, not after it ends.Extended reporting periods allow you more time to make a claim but do not extend your policy. Occurrence Policies For your occurrence policy's claim to be covered, the alleged bodily injury or property damage must: Be caused by an occurrence that takes place in the coverage territory Occur during the policy period; and, Be unknown to the insured before the policy begins Simply put, you can make a claim after your policy period ends, generally speaking, the claim should be covered as long as the occurrence happened during your policy period. The policy doesn't specify when the occurrence (accident) must take place. Thus, an occurrence may happen before or during the policy period, as long as the injury or damage it causes occurs during the policy period. Claims may be made during the policy period or anytime thereafter. A key advantage of an occurrence policy is that it covers claims filed many years after the policy has expired. Claims-Made Policies In many respects, the claims-made policies are identical to their occurrence counterpart. The exclusions, limits, definitions, and "who is an insured" sections in the two forms are very similar but with one big difference: You can only make a claim for something that happened during your policy period: A claim for damages must first be made against any insured during the policy period or any extended reporting period (ERP) that is provided. The bodily injury or property damage must occur on or after the retroactive date if one is shown in you declarations paperwork, but not after the policy period expires. So, while an occurrence policy allows you to make a claim after your policy ends, a claims-made policy requires you to make the claim before your policy ends. Note A claim is typically “made” on the date that you (or your insurer) first receive or record it. A claim made before the policy inception date or after the expiration date is not covered. Retroactive Dates A claims-made policy may contain a retroactive date. When a retroactive date is included, no coverage is provided for claims resulting from events that occurred prior to that date. The retroactive date is the earliest date on which injury or damage may occur and still be covered under the policy. For example, suppose you are insured under a claims-made policy that has a retroactive date of Jan. 1, 2021. Your current policy applies from Jan. 1, 2022, to January 1, 2023. On March 3, 2022, you receive a claim for an injury that was sustained on December 15, 2020. Because the injury occurred before the retroactive date, the claim is not covered. The retroactive date is usually the inception date of your first claims-made policy. This date should remain the same each time your claims-made coverage is renewed. It should not be advanced (moved up) as this will reduce your coverage. When shopping for claims-made coverage, try to avoid buying a policy that includes a retroactive date. Many insurers offer policies that don't contain this provision. Claims-Made Reporting Requirements All claims-made policies stipulate that claims must be made during the policy period. Some policies do not specify a time period for reporting claims. Rather, they simply state that claims must be reported as soon as practicable (or as soon as possible). These policies are known as pure claims-made policies. Some policies are more restrictive, requiring claims to be made and reported to the insurer during the policy period. These policies are called "claims-made-and-reported" policies. A pure claims-made policy is preferable to one that applies on a claims-made-and-reported basis since the former affords broader coverage. Note Certain claims-made and reported policies will offer a post-policy claim window of 30 to 60 days. Switching From a Claims-Made to Occurrence Policy Coverage gaps may occur if you switch from a claims-made policy to an occurrence policy. For example, suppose that you are insured under a claims-made general liability policy. Your policy begins on January 1, 2022, and ends on January 1, 2023. When your policy expires, you elect to renew it under the standard occurrence-based policy. Your occurrence policy runs from Jan. 1, 2023, to Jan. 1, 2024. On December 15, 2022, Ed, a customer of yours, is visiting your office when he trips and falls on a loose piece of carpeting. Ed injures his back. On March 15, 2023, you are notified that Ed has filed a lawsuit against your firm. He claims that you are liable for his injury because you failed to properly maintain the carpet and seeks $50,000 in compensatory damages. The claim is not covered under your claims-made policy because it was made after the policy had expired. The claim is not covered under your occurrence policy either since Ed’s injury did not occur during the term of that policy. Extended Reporting Periods A solution for coverage gaps could be an ERP. An ERP extends the time period during which claims may be made and/or reported to the insurer. A claim is covered by an ERP only if it results from an injury (or another covered event) that occurred before your policy expired. Note ERPs do not extend your policy, and they may provide limited coverage. Many claims-made policies provide an automatic ERP if your insurer cancels or non-renews your policy, replaces it with an occurrence policy, or advances the retroactive date. The automatic ERP usually applies for a short time, such as 60 days. Should You Buy a Claims-Made Policy? Claims-made policies have a number of pitfalls, so businesses typically buy them out of necessity rather than choice. Some coverages, such as employment practices liability, are available only under claims-made policies. Other coverages, like employee benefits liability, may be available on either type of form, but the occurrence version may be very expensive. Because claims-made policies provide less coverage, they are usually cheaper than occurrence forms. Frequently Asked Questions (FAQs) Claims made vs. occurrence...which is better? Generally speaking, occurrence policies may be better for a business because they allow you to file a claim after your policy period ends for an occurrence that happened during the time your policy was active. What is claims-made vs. occurrence? Claims-made vs. occurrence refers to comparing claims-made insurance policies to occurrence policies. The two policies share some of the same characteristics, but have important differences regarding how much time you have to make a claim. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Insurance Journal. "The Most Basic CGL Coverage Concept." International Risk Management Institute. "The Claims-Made CGL Policy." Phelps. "The Retroactive Date—When Timing Is Everything." International Risk Management Institute. "Pure Claims-Made Policy." International Risk Management Institute. "Claims-Made and Reported Policy." Progressive Commercial. "Claims-Made vs. Occurrence."