What Is Claims-Made Insurance?

When shopping for new business insurance—especially Professional Liability and Management Liability insurance coverage—you may come across the term “claims-made policy.” But what is claims-made insurance?

If you’re confused about how this type of coverage works, then you’re not alone. Many policyholders have questions about what claims-made policies are, how they compare to occurrence policies, and what they mean for coverage. Understanding how claims-made insurance works is key to making sure your business is properly protected.

In this post we’ll walk through the basics about what claims-made insurance is, how it how it differs from “occurrence-based” policies, and offer insights on how to evaluate whether it’s right for your needs.

Understanding Claims-Made Insurance

A claims-made insurance policy is a type of liability policy that provides coverage for claims that are both filed and reported to the insurance company during the policy period or an applicable extended reporting period. Unlike occurrence policies that cover claims based on when the incident occurred, claims-made policies focus on the timing of the claim filing itself.

With a claims-made policy, if a claim is made after your policy expires or falls outside the retroactive date, it will not be covered—even if the incident occurred during the policy period. The retroactive date is critical, as it defines how far back an event can occur and still be eligible for coverage under your claims-made policy.

For example, if your claims-made policy has a retroactive date of January 1, 2023, and someone files a claim on November 1, 2024, alleging an incident that happened in March 2023, your policy will likely cover it—provided the policy is active at the time of the claim.

Claims-made policies are typically used by insurance carriers for businesses and professionals in industries where liability claims may arise long after the service or incident occurs. Primarily, this includes Professional Liability (E&O) insurance policies for industries such as healthcare, legal and financial services, consultants and other service providers. However, depending on the nature of the business risk, such as Security Guard Firms, General Liability insurance policies can also be written on a claims-made basis.

How Claims-Made Policies Differ from Occurrence-Based Policies

Understanding the difference between claims-made and occurrence-based coverage is essential, as it could mean the difference between being covered and having to pay out of pocket.

Claims-Made Coverage

Coverage Trigger: A claim must be reported during the policy period (or any applicable extended reporting period)
Retroactive Date: Coverage applies only to incidents occurring after this date
Cost: Typically more affordable for businesses and professionals in the early years of coverage, as premiums are initially lower

Occrrence-Based Policies

Coverage Trigger: The event must have occurred during the policy period, regardless of when the claim is filed
Retroactive Date: Not applicable—coverage is tied solely to the occurrence date
Cost: Generally more expensive because the insurer assumes long-term liability for claims filed years after the policy has lapsed

How To Ensure Proper Claims-Made Coverage

Navigating claims-made policies requires diligence and a clear understanding of how policies function. Here are actionable steps to help you ensure proper coverage for your business or profession:

Understand the Retroactive Date

When purchasing a claims-made policy, make sure the retroactive date aligns with the start of when you began the activities you want coverage for. This ensures all relevant incidents are included under your policy’s protection.

Always Keep Proof of Coverage

If you’re switching insurers or plans, maintain a paper trail of your previous policies. This documentation may be crucial when addressing a claim that references an older insurance period.

Prioritize Tail Coverage (Extended Reporting Period) for Discontinued Policies

If you decide to terminate a claims-made policy, evaluate whether tail coverage is necessary. Tail coverage can effectively extend your reporting period, providing peace of mind for potential future claims.

However, it’s important to understand that while tail coverage extends your ability to report claims after your policy ends, it does not extend coverage for new incidents. It only protects you for claims related to work performed before your policy expired, as long as the incident occurred after the retroactive date.

Partner with an Insurance Broker

Working with an experienced commercial insurance broker or consultant ensures you understand every detail of your policy, including what constitutes a covered claim and how reporting works.

Why Understanding Claims-Made Insurance Matters

While you may not have had a choice in selecting a claims-made policy for your business, that doesn’t mean you don’t have control. The truth is, claims-made coverage is a highly effective and protective insurance format—if it’s understood and managed correctly.

It’s designed to address the specific realities of long-tail liability exposures, which are common in professional services industries and other high-risk industries. However, unlike occurrence-based coverage, it demands more attention to timing, continuity, and planning.

That’s why having a knowledgeable, proactive insurance advisor is so important. When managed properly, a claims-made policy can provide seamless protection for both your current operations and the work you’ve done in the past.

The key is to stay ahead of the curve—preserving your retroactive date, avoiding coverage gaps, reporting claims properly, and planning ahead for things like tail coverage if you ever exit or restructure your business. Ultimately, a claims-made policy isn’t a risk—it’s a tool. And when you know how to use it, it can serve your business just as effectively as any other policy type.