What’s the difference between occurrence and claims-made coverage?
Occurrence-based and claims-made policies work differently because they respond to claims on different timelines. Think of these policy types running on two different clocks.
- Occurrence-based policies: are triggered when the incident occurs, regardless of when the claim is filed.
- Claims-made policies: are triggered when a claim is filed, not when the incident occurs.
Occurrence policies cover incidents that happen when your insurance was active. It can help protect past incidents even if the claim comes years later.
On the other hand, claims-made policies require active coverage (or tail coverage when the claim is reported.
Occurrence vs. claims-made: key differences at a glance
Occurrence and claims-made policies respond on different timelines. Here’s a quick side-by-side look to help these terms make more sense:
| Factor | Occurrence coverage | Claims-made coverage |
| What triggers coverage? | When the incident occurs | When the claim is filed |
| When the claim can be reported | Anytime after the incident | Only while the policy is active (or during tail coverage) |
| Premium considerations | Higher upfront costs, but stable over time | Lower at first; increase as exposure grows |
| Need for tail coverage? | No | Often yes |
Confused with all this insurance jargon? No worries, we’ll go more in-depth about what this all means below, but keep these factors in mind when you’re reviewing coverage.
What is an occurrence policy?
An occurrence policy can help cover incidents that happen during the policy period, even if the claim is reported years later. The timing of the incident — not the claim — is what triggers coverage.
How an occurrence-based policy works
- The incident must occur while the policy is active.
- The claim can be reported anytime after, even if the policy has expired.
- It can help with things like customer injuries, accidental property damage and other unexpected issues.
- It’s commonly used in a general liability policy, product liability and other coverages built around physical risks.
Example of occurrence coverage in action
Say you’re a plumber with a general liability policy that ran from January to December 2025. You complete sink repairs in June 2025, which caused a slow leak that caused damage for the rest of the year. In early 2026 — after the policy has ended — the homeowner discovers the leak and claims the work caused water damage to their floor.
Because the incident occurred in 2025 (in this case, the property damage), the plumber’s 2025 occurrence-based policy could help cover the related expenses, up to the policy limit.
Pros and cons of occurrence policies
Occurrence-based policies can offer lasting protection for work you’ve done. Here’s what to consider as a small business owner.
Advantages
- Long-term reassurance. If something happens while your policy is active, your coverage may still help later, even if the claim is filed years later.
- No tail coverage needed. You typically don’t have to buy an extended reporting period after the policy ends.
Considerations
- Premiums can be higher. You often pay more upfront because the policy can help with claims that appear long after the job is done.
- Some issues take time to show up. It can be harder to predict future claims.
- Not available for every coverage type. Some policies are generally only offered as claims-made.
What is a claims-made policy?
A claims-made policy can help cover incidents when the claim is filed, as long as the event happened on or after your policy’s retroactive date. In other words, it’s all about when the claim lands on your desk — not when the mistake happened.
How a claims-made policy works
- The claim must be reported to the insurer while the policy is active (or during a purchased tail coverage period).
- The incident must happen on or after your retroactive date.
- These policies are common for professional services, where mistakes or oversights may show up long after the work is done.
- Claims-made insurance can help with costs related to professional errors, missed deadlines or inaccurate advice, depending on your policy.
NOTE: Some claims-made policies might have more specific requirements for reporting a claim, such as within 60 days of an incident.
Example of claims-made coverage in action
A marketing consultant finishes a website project in 2024. In early 2026, the client files a lawsuit alleging the consultant’s work caused lost revenue. The consultant files a claim with his insurance company soon thereafter.
Because the claim is filed in 2026, the consultant needs an active claims-made policy (or tail coverage) in 2026 for the insurance provider to help cover the claim — even though the work was done two years earlier, depending on your policy.
Pros and cons of claims-made policies
Claims-made policies can offer flexibility for businesses where problems might not show up right away. Here’s what small business owners often like — and what to think about before choosing this type of coverage.
Advantages
- Lower starting costs. Premiums often begin lower, which can help new businesses manage upfront expenses.
- Useful for service-based work. If your job involves giving advice or making professional decisions, claims-made policies can help cover issues that crop up long after the work is finished.
- Customizable options. You can add tail coverage or adjust your retroactive date based on how far back you want to have protection.
Considerations
- Coverage dependent on active insurance. If you cancel your policy and don’t add tail coverage, later claims may not be covered.
- Premiums may increase. Costs often rise over time as the insurer takes on more of your past work.
- More details to manage. Retroactive dates and tail coverage can add complications to managing insurance.
Claims-made policies require continuous coverage. If you cancel a policy, change carriers or adjust your retroactive date, you could lose protection for past work unless you add tail coverage. It’s one of the reasons some business owners find this structure a bit more hands-on.
Now that you know how each structure works, here’s why insurers use them — and which coverages typically fall into each category.
Why different policy structures exist (and which coverages use each one)
Here’s the thing: nobody really tells you about these policy formats. Business owners usually don’t choose between an occurrence policy and a claims-made policy. Insurers decide which format fits the type of risk the policy is meant to cover. Your job is choosing the type of coverage your business needs — and the policy structure comes with it.
Here’s how insurers typically match each format to different kinds of risks.
Coverages that use an occurrence-based structure
Occurrence-based coverage is built for risks that involve physical events — things that happen at a specific moment, like injuries, property damage or accidents. Because these situations are tied to a clear point in time, the occurrence format works well.
You’ll usually see occurrence forms used for:
What this means for your business:
These policies can help cover incidents that happen during the policy period, even if the claim is filed later. If your work involves on-site customers, hazardous worksites or jobsites, this is the structure you’ll typically get.
Coverages that use a claims-made structure
Claims-made coverage is tied to risks associated with your professional judgment, advice or services. Problems may not appear until months or years later. Because these issues don’t usually have a single “incident moment,” insurers use a structure tied to when the claim is filed.
You’ll usually see claims-made forms used for:
What this means for your business:
These policies can help cover issues that show up long after the work is done, as long as the claim is filed while the policy is active (or during tail coverage) and the event happened after your retroactive date.
Are all business insurance policies occurrence or claims based?
No. Not every type of business insurance is written as an occurrence or claims-made policy. For instance, workers’ compensation and commercial auto don’t use occurrence or claims-made formats. They each follow their own state and industry rules for how claims are handled.
Do you need tail coverage or retroactive coverage?
If you have a claims-made policy — like professional liability, cyber liability or other service-based coverage — two timing features matter: your retroactive date and whether you need tail coverage. Here’s what they mean in simple terms.
What is a retroactive date?
Your retroactive date is simply the earliest date your policy will recognize your work. Anything that happened on or after that date can be part of a covered claim (as long as the claim is filed while the policy is active).
A retroactive date matters because:
- It helps protect your past work, not just your new projects.
- If you’re changing insurers, keeping the same retroactive date preserves protection for earlier work.
Example:
You’re an accountant with a professional liability policy that has a retroactive date of January 1, 2024. A client later reports that a 2025 tax filing included an error that led to financial penalties. That incident falls after the retroactive date — so it may be eligible for coverage under a current claims-made policy.
What is tail coverage?
Tail coverage, also called an extended reporting period (ERP), lets you report claims after your claims-made policy ends. It extends the time you can file a claim, even though you’re no longer paying for the policy.
Tail coverage matters because:
- It’s especially helpful during transitions — when you’re closing your business, taking a break or moving to a new insurer.
- Without tail coverage, claims filed after cancellation usually aren’t eligible for coverage, even if the incident happened after the retroactive date.
Example:
An architect closes their practice in March 2025 and cancels their professional liability policy. Six months later, a homeowner filed a claim saying a 2024 design flaw led to unexpected structural issues. If the architect purchased tail coverage, they may still be able to report the claim even though the policy is no longer active.
These features only apply to claims-made policies, so you won’t see them in occurrence-based coverages like general liability.
