A claims-made policy covers claims only if the incident and the report of the claim both happen while the policy is active, requiring continuous coverage and a retroactive date to protect against past work; otherwise, you might need costly tail coverage to extend reporting, making it common for professional liability where reporting delays are frequent.
Occurrence policies provide the best protection and, though somewhat more expensive than claims made policies, offer long-term peace of mind. Unfortunately, they are becoming increasingly hard to find. Claims made coverage, by contrast, will only apply if the claim is made while the policy is still in effect.
Coverage under a claims made and reported policy is triggered if the claim is both made and reported within the policy period or a defined grace period (e.g., 60 to 90 days post-expiration).
The claims-made policy offers greater flexibility, because your last year's policy is the one covering your past (prior acts). Thus, you can increase your limits or buy new coverage that was not available when you started your policy.
If you make a claim your insurer will pay out for the loss that is covered under the policy. If you don't make a claim, you won't get your money back; instead it is pooled with the premiums of other policyholders who have taken out insurance with the same insurance company.
Your insurance company will appoint an insurance adjuster, or multiple adjusters, to investigate your claim. Typically, the adjuster contacts you within one to three days of the claim filing. Your adjuster arranges an inspection, assesses the damage to your car, and/or addresses any personal injury claims.
When talking to an insurance adjuster, avoid admitting fault, speculating on the cause or extent of injuries/damages, giving recorded statements without legal advice, and volunteering extra information like past injuries or unrelated details, as anything said can be used to minimize your claim; instead, stick to basic facts, remain polite but brief, and consider getting legal counsel. Don't sign anything without review, and avoid saying you're "fine" or "okay" immediately after an incident.
Directors & Officers Liability, Employment Practices Liability and Miscellaneous Professional Liability insurance are examples of policies that are offered on a claims-made basis because of the long tail exposure.
Common Mistakes When Talking to Insurance Companies
It's simple: The $1,000,000 is the amount of professional liability coverage available for the settlement or a judgment against the insured in a single claim (this is known as the amount “per claim” rather than as occurrence in some places, but “occurrence” is the actual insurance term.)
Tail coverage only applies to a claims-made policy. It extends the amount of time a claim can be brought against you and reported. Because it doesn't matter when a claim gets filed with occurrence insurance, as long as the loss occurred during your policy period, tail coverage isn't necessary.
Many insurance policies, including general liability policies, have “per occurrence” limits, meaning that they will pay up to a certain amount of money per occurrence.
The "life insurance 7 year rule," or 7-Pay Test, is an IRS test for permanent life insurance (like Whole or Universal Life) to prevent overfunding; if you pay more than the maximum premium needed to fully fund the policy in seven years, it becomes a Modified Endowment Contract (MEC). MECs lose some tax benefits, making withdrawals and loans taxable as income (earnings first) and potentially subject to penalties, though they still provide a tax-free death benefit. The test resets if you make significant changes (like increasing the death benefit) to the policy, starting a new seven-year period.
For $9.95 a month, Colonial Penn buys you one "unit" of guaranteed acceptance whole life insurance, where the actual death benefit amount depends on your age and gender (or age only in Montana). The older you are, the less coverage you get per unit, but premiums never increase, and no medical exams are required for ages 50-85.
8 Red Flags That Insurance Companies Aren't Going to Cover Your Bills
What they won't tell you is that their primary job is to save their company money—often at your expense. Insurance adjusters are not your advocates. They're trained professionals whose performance is measured by how much they save their company. Every dollar you don't receive is a dollar their employer keeps.
Plus, insurance companies fear litigation; they would rather pay your claim than risk losing even more money in a lawsuit. Keep reading to learn about the top nine tricks insurance companies use to avoid paying you a fair settlement and how a legal professional can help you get the compensation you deserve.
The primary mission of any insurance adjuster is to limit the payout their company must make as much as possible – or deny a claim completely. An adjuster will often use tactics to try and get you to settle for a lowball offer or make a decision that hurts your case.