What is the difference between "occurrence" and "claims-made" policies?

Occurrence policies and claims-made policies serve distinct functions in insurance coverage, particularly in liability insurance.

Occurrence policies provide coverage for incidents that occur during the policy period, regardless of when the claim is filed. This means that if an event happens while the coverage is active, the policy will respond to claims related to that event even if the claim is reported years later, possibly after the policy has expired. This built-in long-lasting protection is a cornerstone of occurrence policies, ensuring that policyholders are safeguarded for incidents that happened during the coverage timeframe.

In contrast, claims-made policies only cover claims that are made during the active policy period, concerning incidents that also occurred while the policy was in force. This creates a more limited window of coverage, which may require policyholders to keep renewing their policy to maintain protection over time.

Understanding this distinction is crucial for policyholders because it affects how risk is managed and how long one needs to maintain coverage for potential claims related to past events. Therefore, the defining characteristic of occurrence policies is indeed that they address incidents occurring in the policy period without regard to when the claim is filed, leading to the conclusion that the correct option is that occurrence policies cover incidents happening during the policy period regardless of when the claim is filed.