What is a "claims-made" policy?

A "claims-made" policy is a specific type of liability insurance that provides coverage for claims only if the policy is active at the time the claim is made, regardless of when the incident that caused the claim occurred. This means that if the incident took place while the policy was active, but the claim is filed after the policy has expired, the policy will not provide coverage. This is particularly relevant in professions where claims may arise long after an action has been taken, such as in healthcare or professional services.

This type of policy is designed to mitigate risks for insurers, as it limits their liability to the duration of the policy. It also emphasizes the importance of keeping coverage active, particularly for professionals who may face claims long after services were rendered. Understanding this aspect is crucial for anyone engaged in professions with a high risk of claims, as it affects how they manage their insurance and risk exposure over time.

Other options reflect misconceptions about how claims-made policies operate. Some suggest broader coverage than is actually the case, while others mischaracterize the nature of the policy's timeline regarding claims, failing to capture the essence of a claims-made approach.