Insights 101 | What claims made insurance means for your business
Will it respond? Whether or not your policy will respond to a claim is important to know. Claims made insurance is one of the two categories that all property and casualty (P&C) policies fall into. Ultimately, the type of coverage your business selects will determine:
- What your company’s responsibilities will be in the event of a claim
- How much your premiums will cost, both now and in future renewal periods
Most P&C insurance policies are occurrence policies, which tend to be less complicated. Here’s how an occurrence policy works. Firstly, an occurrence policy covers any instance of bodily injury or property damage that happen within your policy period. This coverage is regardless of the date that you submit the claim.
In effect, this means you could potentially submit a claim years after your policy period ends, as long as the event that triggers the claim occurred during your period of coverage.
One advantage of having this type of policy is that the period of time you are insured is protected “forever” by the occurrence policy you had that year.
When your policy period ends, there is no need to renew the policy or purchase “tail coverage” to cover events from your policy period. As a business owner, if you face the risk of unknown or unreported claims arising long after your policy period is over, an occurrence policy might be right for you.
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Understanding claims made insurance
Claims made policies tend to be more complex than occurrence policies. This because factors such as “tail coverage” and retroactive dates come into play. Claims made policies only cover claims made during your policy period; it’s unnecessary to determine when the bodily injury or property damage occurred.
What’s advantageous about this type of policy is that your claims today are covered by the policy you have today. This gives you the benefit of purchasing policy limits that correspond with the current economic and legal environment in which you operate your business.
However, there is a disadvantage of a claims made policy. If you or the insurer cancels or does not renew the policy, you will have no coverage for claims made after the cancellation or non-renewal date for injuries or damage that occurred prior to that date.
Ask us if claims made insurance is a good fit for your business
Typically for the first five years of coverage, claims made policies tend to be less expensive than occurrence policies. However, as your business faces more exposures, your premiums will increase. Often after five years, the cost of a claims made policy begins to even out with occurrence policies.
The premium cost, amount of coverage and your type business are just some of factors that should be considered when deciding which policy type will best suit your organization’s needs.
An ALIGNED Advocate can help you evaluate available insurance options and secure the best products, services and solutions for your business.
ALIGNED brokers understand the nuances of commercial insurance coverages and can help you make informed decisions about your business insurance options. Bookmark our insurance info blog to keep current with Canadian insurance insights.
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