Comparing a claims-made vs. occurrence insurance policy

Business insurance can be tricky to understand. Insurance terms are often complex and complicated, especially if you aren’t an insurance expert!

Two terms that business owners often struggle with are “claims-based” and “occurrence-based”. These phrases describe how different types of policies handle potential claims based on when you become aware of them.

What is a claims-made insurance policy?

A claims-made policy is designed to provide cover when a claim is first made against your business during the policy period. This means that claims are only covered if a claim is notified or submitted during the period of an active policy. You cannot claim after your policy has lapsed, so your insurer needs to be notified during the period of insurance.

Claims made policies are also subject to the policy’s retroactive date. The retroactive date is either the date from which you have held uninterrupted insurance cover (even if you have switched insurers) or the date from which an insurer has agreed to cover you. Incidents that happened before your retroactive date will not be coveredFor example, say you took out a Professional Indemnity policy in January 2015 and cancelled it in January 2021. A client comes to you in June 2022, claiming a mistake in the advice you gave in March 2018 caused them to suffer a loss. This claim would not be covered because it was notified after your policy was cancelled.

An example of the impact of the retroactive date: If you had a claim where the act which caused it occurred before the retroactive date, it would be declined.

What is an occurrence-based insurance policy?

An occurrence-based policy is designed to cover incidents that occur during the policy period, regardless of when the claim is made. This means that you may be able to make a claim to your insurer after your policy has been cancelled. The act that causes a claim must happen during the policy period.

For example, you take out a Public Liability policy in January 2015 and cancel it in January 2021. A customer contacts you in September 2022, alleging that you accidentally damaged their property in October 2020. This claim may be covered because the incident causing the claim happened while your policy was active (or “in force”).

Claims-made vs occurrence insurance: What types of policies are available?

Depending on the type of business you run, you may end up with a mix of claims-made and occurrence-based policies.

Insurance coverages that are typically claims-made policies include:

• Professional Indemnity
• Management Liability

Insurance coverages that are typically occurrence-based policies include:

• Public Liability
• Business Insurance

What’s the benefit of a claims-made policy?

Claims-made policies—particularly Professional Indemnity insurance—often cover customised services and advice. These types of specialised services can have long-term consequences. Clients may pursue legal action months or even years after you’ve worked with them. A claims-made policy helps protect your small business from claims where it may be difficult to determine the date when a loss occurred.

Business insurance for busy Aussies

BizCover makes it simple and quick to compare multiple business insurance policies at the same time. Getting covered is a no dramas experience—start comparing policies now and see for yourself!