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Claims-Made Policy

What is a Claims-Made Policy?

Claims-Made Policy definition may refer to a type of liability insurance policy that provides coverage for claims reported to the insurance company during the effective policy period, regardless of when the actual incident occurred, as long as it is after the retroactive date specified in the policy. This policy structure contrasts with an "occurrence" policy, which covers incidents that occur during the policy period, no matter when the claim is actually reported.

Claims-Made Policy in More Detail

Additional Insight on Claims-Made Policies

Claims-Made Policies are particularly common in professions where the risk of liability can emerge long after the services have been provided, such as in the medical and legal fields. For example, a malpractice claim against a doctor might arise years after a procedure, long after the policy period has ended. By having a Claims-Made Policy, the doctor ensures that any claims reported during the active policy period—provided they occurred after the retroactive date—are covered.

Real-World Applications:

  1. Medical Professionals: Physicians and hospitals often purchase Claims-Made malpractice insurance. If a patient sues for alleged malpractice discovered years later, as long as the claim is reported during the active policy, they will be protected.

  2. Legal Professionals: Lawyers utilize Claims-Made Policies to cover allegations of malpractice, such as failure to file a lawsuit in time or negligence in case management.

  3. Consultants and Contractors: Consultants in fields like IT or construction may also find Claims-Made Policies beneficial, as their work may lead to claims that arise well after the project is completed.

Important Considerations:

  • Coverage Continuity: Since these policies require continuous coverage, it is critical for professionals to maintain their policies to avoid gaps in coverage. Typically, if a Claims-Made Policy is canceled, the policyholder may need to purchase “tail coverage” to protect against future claims arising from past work.

  • Retrospective Date Awareness: It is essential for policyholders to understand their retroactive date, as this marks the boundary for incidents that may be claimed.

  • Market Variability: Pricing and availability of Claims-Made Policies can vary significantly based on the profession, risk factors, and individual claims history.

In summary, while Claims-Made Policies provide defined coverage parameters and can limit long-term exposure for insurers, they also necessitate proactive management from the policyholder to ensure ongoing compliance and protection.

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