Which type of policy covers claims made during its effective period?

A claims made policy is designed to cover claims that are made during the time the policy is in effect. Unlike occurrence policies, which provide coverage for incidents that occur during the policy period regardless of when the claim is filed, claims made policies require that both the event giving rise to the claim and the claim itself occur within the effective period of the policy. This means that if a claim is filed after the policy has expired, it will not be covered, even if the incident happened while the policy was active.

This structure allows insurers to evaluate their risk more accurately, as they know the time frame in which claims can be made. Additionally, claims made policies often include provisions for retroactive coverage, depending on the specific conditions of the policy. Understanding this distinction is crucial for anyone navigating insurance options, as it affects how coverage is utilized and the potential for future liabilities after the policy ends.