Claims-Made Policy
A claims-made policy provides coverage only for claims that are both made and reported to the insurance company during the active policy period. This differs from occurrence policies, which cover incidents that happen during the policy period regardless of when the claim is filed.
Example
“The doctor's malpractice insurance was a claims-made policy, so when a patient sued three years after treatment, coverage depended on having active insurance when the lawsuit was filed.”
Memory Tip
Claims-made = 'Made during' - the claim must be made during the active policy period to be covered.
Why It Matters
Understanding claims-made policies is crucial for professionals like doctors and lawyers who face liability risks that may surface years after their work. Without proper coverage continuation or tail insurance, you could be personally liable for large settlements.
Common Misconception
People often assume all insurance works the same way and don't realize that with claims-made policies, letting coverage lapse can leave them exposed to claims from past work. They may think that if an incident happened while insured, they're automatically covered regardless of when it's reported.
In Practice
Dr. Smith has a claims-made malpractice policy from 2020-2023 with $1 million coverage. A patient files a lawsuit in 2024 for treatment received in 2022. If Dr. Smith let his policy lapse in 2023 without buying tail coverage, he has no insurance protection despite being covered when he treated the patient. However, if he maintained continuous claims-made coverage through 2024, the lawsuit would be covered under his current policy.
Etymology
The term combines 'claims' with 'made,' emphasizing that coverage depends on when the claim is made rather than when the incident occurred.
Common Misspellings
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Related Terms
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See Also
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