What is a 'claims-made policy' in liability insurance?

A claims-made policy in liability insurance is characterized by its unique coverage framework, which is designed to respond to claims filed during the policy period, regardless of when the incident that led to the claim occurred. This means that if a claim is made during the active term of the policy, the insurer will provide coverage, as long as the incident that resulted in the claim took place after the policy’s retroactive date.

This feature is particularly valuable for professionals who may be exposed to claims for an extended period after the provision of their services, as it allows them to have coverage for claims that arise from services rendered even if those services occurred in the past, as long as they fall within the specified policy period and meet the retroactive date requirement.

Options that specify only covering incidents during the policy term or health-related claims do not accurately reflect the claims-made nature of this type of policy, highlighting the importance of claims being filed during the active policy period rather than strictly correlating with when those incidents occurred. Additionally, the notion of unlimited coverage for lawsuits does not align with the specific provisions of a claims-made policy, which typically includes coverage limits akin to other forms of liability insurance. The defining characteristic of a claims-made policy is its focus on when claims are made,