Occurrence vs. Claims-Made Insurance Policies: What's the Difference?
Introduction
When it comes to insurance policies, there are two main types: occurrence and claims-made. Both types of policies have their own unique advantages and disadvantages, so it's important to understand the difference between them before you purchase a policy.
In general, occurrence policies are more common and provide broader coverage than claims-made policies. However, claims-made policies can be more affordable and easier to manage.
Occurrence Policies
Occurrence policies provide coverage for incidents that occur during the policy period, regardless of when the claim is made.
For example, if you have an occurrence policy and you are sued for an accident that occurred during the policy period, your insurance company will be responsible for defending you and paying any damages that are awarded against you, even if the claim is not made until after the policy period has ended.
Advantages of Occurrence Policies:
- Provides broader coverage than claims-made policies
- Protects you from claims that are made after the policy period has ended
Disadvantages of Occurrence Policies:
- Can be more expensive than claims-made policies
- Can be more difficult to manage
Claims-Made Policies
Claims-made policies provide coverage for claims that are made during the policy period, regardless of when the incident occurred.
For example, if you have a claims-made policy and you are sued for an accident that occurred before the policy period began, your insurance company will not be responsible for defending you or paying any damages that are awarded against you.
Advantages of Claims-Made Policies:
- Can be more affordable than occurrence policies
- Can be easier to manage
Disadvantages of Claims-Made Policies:
- Provides narrower coverage than occurrence policies
- Does not protect you from claims that are made after the policy period has ended
Which Type of Policy Is Right for You?
The type of insurance policy that is right for you will depend on your individual needs and circumstances.
If you are looking for the most comprehensive coverage, then an occurrence policy is the best option. However, if you are looking for a more affordable and easier-to-manage policy, then a claims-made policy may be a better choice.
Additional Information
For more information on occurrence and claims-made insurance policies, please consult with an insurance agent or broker.
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