An occurrence policy covers incidents that happen during the policy period, even if the claim is filed years later. A claims-made policy covers claims that are first made during the policy period, and only back to a retroactive date. Because a claims-made policy stops responding once you cancel it, you usually need tail coverage (an extended reporting period) when you switch carriers or retire. General liability is usually occurrence; professional liability (E and O) and directors and officers are usually claims-made.
This is one of the most important — and most misunderstood — distinctions in commercial insurance, especially for service and advice businesses. Getting it wrong can leave you uncovered for work you already completed. This guide explains both policy forms, the gap that catches people, and what to check on your own policy. It is general education, not advice for your specific policy — confirm your terms with a licensed agent.
Occurrence policies
An occurrence policy responds to an incident that took place while the policy was in force, no matter when the claim is actually filed. If an injury happens in 2026 while your occurrence policy is active, that policy responds even if the lawsuit arrives in 2029 and you have since changed carriers. The coverage is "locked in" by the date of the event.
- Trigger: the date the incident happened.
- Advantage: no gap when you switch or cancel — past years stay covered by the policy that was in force then.
- Typical lines: general liability, commercial auto, workers compensation.
Claims-made policies
A claims-made policy responds only if the claim is first made against you while the policy is active — and only for incidents that happened on or after the policy's retroactive date. Cancel the policy, and it stops responding to new claims, even for work you did while it was in force.
- Trigger: the date the claim is first made (reported).
- Retroactive date: the earliest incident date the policy will cover — keep it stable when you renew or switch, or you can lose coverage for prior work.
- Typical lines: professional liability (errors and omissions), directors and officers, employment practices, cyber.
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The gap — and tail coverage
The danger with claims-made is the gap that opens when you leave the policy. If you switch carriers, retire, or close the business, a claim filed after cancellation for work done before it is not covered — unless you buy tail coverage, also called an extended reporting period (ERP).
- Tail / ERP — extends the time you can report claims after the policy ends, closing the gap for past work. Often bought when retiring or switching.
- Nose / prior-acts coverage — the mirror image: a new claims-made policy can pick up your old retroactive date so prior work stays covered without a tail.
For advice and service businesses that carry professional liability, planning for the tail is essential — it is the single most-forgotten step when changing carriers or winding down.
Which policy form do I have?
Check your declarations page: it states whether each policy is occurrence or claims-made, and a claims-made policy lists a retroactive date. As a rule of thumb:
- Usually occurrence: general liability, commercial auto, workers compensation.
- Usually claims-made: professional liability / E and O, directors and officers, employment practices liability, cyber, and many medical malpractice policies.
See professional liability for the coverage most affected by this distinction.
What to do about it
- Know which form each policy is — read the dec page; note any retroactive date.
- Protect your retroactive date — when you renew or switch a claims-made policy, keep the same (or earlier) retroactive date so prior work stays covered.
- Plan the tail before you leave — buy an extended reporting period when you retire, close, or switch off a claims-made policy.
- Ask about prior-acts (nose) coverage — a new carrier may cover your old retro date instead of a tail.
- Confirm with a licensed agent — the right approach depends on your policy and situation.
Frequently Asked Questions
What is the difference between occurrence and claims-made?
An occurrence policy covers incidents that happen during the policy period, whenever the claim is filed. A claims-made policy covers only claims first made during the policy period, back to a retroactive date, and stops responding once it is cancelled.
Is general liability occurrence or claims-made?
General liability is usually written on an occurrence form. Professional liability (E and O), directors and officers, employment practices, and cyber are usually claims-made. Always confirm on your declarations page.
What is tail coverage and when do I need it?
Tail coverage, or an extended reporting period (ERP), lets you report claims after a claims-made policy ends. You typically need it when you retire, close the business, or switch off a claims-made policy, so past work stays covered.
What is a retroactive date?
On a claims-made policy, the retroactive date is the earliest incident date the policy will cover. Keep it stable when you renew or switch; a later retroactive date can leave prior work uncovered.
What happens if I cancel a claims-made policy without a tail?
New claims for past work generally will not be covered. Cancelling a claims-made policy without buying a tail (or having a new policy pick up the old retroactive date) can leave a serious gap.
Is occurrence or claims-made better?
Occurrence avoids the tail problem, but many professional, management, and cyber liability policies are only offered as claims-made. The practical goal is to protect your retroactive date and plan the tail — not to insist on one form.
Quick glossary
- Occurrence policy
- Covers incidents that happen during the policy period, whenever the claim is filed.
- Claims-made policy
- Covers claims first made during the policy period, back to the retroactive date.
- Retroactive date
- The earliest incident date a claims-made policy will cover.
- Tail coverage (ERP)
- An extended reporting period that lets you report claims after a claims-made policy ends, covering past work.
- Prior-acts (nose) coverage
- A new claims-made policy picking up your old retroactive date so prior work stays covered.