How does an occurrence policy differ from a claims-made policy?

An occurrence policy is designed to provide coverage for incidents that take place during the policy term, regardless of when the claim is actually filed. This means that if an event occurs while the policy is active, the insurer will cover it even if the policyholder makes the claim years later, after the policy may have expired. This characteristic provides long-term protection for the insured, as it ensures that they are covered for past events that could result in claims made after the policy period.

In contrast, a claims-made policy only covers claims that are filed during the active policy period, but it does so for incidents that may have occurred at any time in the past, provided that they were not previously reported or are not excluded by the policy. This creates a more immediate need for the insured to report incidents, as failing to do so within the coverage period could leave them unprotected.

The structure of these policies leads to differences in coverage and risk management. An occurrence policy generally provides broader long-term protection than a claims-made policy, as it spans the entire period the insured was covered and not just the duration of the policy itself.