What does "claims-made" coverage in liability insurance indicate?

"Claims-made" coverage in liability insurance indicates that claims are covered only if they are made during the policy period. This means that for a claim to be eligible for coverage, the actual claim needs to be reported while the policy is active. This type of coverage is often used in professional liability insurance, where claims may arise well after the services have been rendered.

Understanding claims-made coverage is essential, as it directly affects how insured entities manage their risks and liabilities. Under this arrangement, if a policyholder has a claim arising from a wrongful act that occurred while the policy was in effect, they must ensure that the claim is also reported during the same policy period.

This requirement distinguishes claims-made policies from occurrence policies, which cover claims regardless of when they are reported, as long as the incident occurred during the policy period. Therefore, the primary focus of claims-made coverage is the timing of the claim being made, rather than when the incident that caused the claim occurred.