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Cost
Claims made coverage involves a step process with premium increases over the first
five years of coverage in increments proportional to the claims reporting for that
experience. The initial premium and subsequent years' premium are substantially
lower than an occurrence policy. As of the fifth year the claims made premium reaches
a mature level and premium adjustments are based on annual rate changes only.
With occurrence coverage the insured pays the mature premium beginning in the first year
because the insured is prepaying for tail costs whether the tail gets used or not.
Limits of Coverage
Claims made coverage will respond to incidents arising on or after the policy retroactive
date and which are reported during the term of the policy.
Occurrence coverage will respond to incidents arising from the coverage period - regardless
of when those claims are reported.
Prior Acts or Retroactive Coverage
A claims made policy may be endorsed to respond to incidents which occurred before the
policy start date also referred to as policy retroactive date.
No Prior Acts coverage is provided for an occurrence policy.
Extended Reporting or Tail Coverage
If you cancel a claims made policy you may need to purchase Tail coverage to cover incidents
that have not been reported to the company during the policy term. Some companies will offer
a free tail at retirement, subject to certain conditions. The cost of a Tail is approximately
200% of the final year premium.
No Tail coverage is needed for an occurrence policy because incidents that occurred during
the policy period are covered no matter how much later they are reported.
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