Occurrence vs Claims-Made Policies
Every commercial liability policy is structured one of two ways — and the difference matters a lot when you cancel, switch carriers, or close a business.
Occurrence policies cover incidents that happened while the policy was active, regardless of when the claim is filed. Claims-Made policies cover claims that are filed while the policy was active, regardless of when the incident occurred (within a defined retroactive period).
For long-tail claims (professional services, healthcare, products) the difference is the gap between when something goes wrong and when the client discovers it — which can be years.
Side-by-side
| Dimension | Occurrence | Claims-Made |
|---|---|---|
| What triggers coverage | The date the incident occurred. If the policy was active on the incident date, it responds — even if the lawsuit is filed 10 years later. |
The date the claim is filed against you. The incident must have occurred after the policy's retroactive date (often the policy's first effective date). |
| Commonly used for | General Liability, Business Owners Policy, Commercial Auto, Workers Comp. Short-tail risks where the harm and the claim happen close together. |
Professional Liability / E and O, Directors and Officers (D and O), Employment Practices Liability (EPLI), Cyber, medical malpractice. Long-tail risks where harm may not be discovered for years. |
| What happens when you cancel | You stay protected for any incidents that happened during the policy period — even claims filed years after cancellation. No tail purchase needed. |
Coverage ENDS when you cancel. A claim filed after cancellation gets no defense. You must buy a tail policy (Extended Reporting Period, ERP) to keep coverage for past incidents — often 1, 3, or unlimited years. |
| Tail / ERP cost | Not applicable. No tail needed at cancellation. |
1-year tail typically costs 75-100% of the prior annual premium. Unlimited tail (recommended for retiring professionals) often 150-300% of annual premium. Price varies by carrier. |
| Switching carriers mid-tail | No issue. Each year's incidents are covered by whichever carrier was on the policy that year. |
New carrier asks about prior-acts coverage. You either pay tail on the old policy OR buy prior-acts on the new policy back to your original retro date. Often more cost-effective than tail. |
| Best for retiring or closing business | Walk away — prior-period incidents are covered forever. |
Buy the longest tail you can afford. Unlimited tail is the gold standard for professionals retiring from practice; otherwise consider 3-5 year ERPs. |
Bottom line
If you have a choice, occurrence is operationally simpler — but it's not available for many professional / financial / cyber coverages because the long-tail nature of those risks makes occurrence pricing impractical.
For claims-made policies, the discipline is: never let coverage lapse during your practice, never switch carriers without confirming prior-acts coverage matches your old retro date, and plan for tail when you close or retire.
Mistakes in transition cost real money. Talk to your agent BEFORE switching carriers — coverage gaps are usually preventable but only if you know to look for them.
Related guides
Sources cited
- Occurrence form coverage — International Risk Management Institute (IRMI), 2024
- Claims-made coverage trigger — International Risk Management Institute (IRMI), 2024