How do occurrence policies differ from claims-made policies?

Occurrence policies are designed to cover events that occur during the policy period, regardless of when the claim is actually filed. This means that if a covered event takes place while the policy is in effect, the insurer will cover the claim even if it is submitted after the policy has expired. This aspect provides a level of long-term security for the insured, as they are protected against claims for incidents that happened during the coverage window, even if the claim arises later.

This concept fundamentally distinguishes occurrence policies from claims-made policies, which only provide coverage for claims reported during the active policy term. In claims-made policies, the timing of both the incident and the report of that incident is critical. The distinction is essential for policyholders to understand as it can significantly affect their coverage depending on the nature of the incidents they might face.

The other options address aspects such as pricing and coverage specifics, but do not accurately capture the core difference between occurrence and claims-made policies. Understanding these differences is crucial for making informed decisions regarding insurance coverage.