What determines the structure of a claims-made policy?

The structure of a claims-made policy is determined by the requirement that claims must be reported within the policy period. In a claims-made policy, coverage is triggered by the reporting of a claim rather than the occurrence of the event that gave rise to the claim. This means that for a claim to be eligible for coverage, it must be reported during the active term of the policy.

If a claim is made after the policy period has ended, it typically will not be covered, unless there’s an extended reporting period (also known as a “tail” coverage) option purchased or offered. This definition of the claims-made structure is crucial for both insurers and policyholders, as it defines the time frame in which claims can be reported for them to be considered valid for coverage under that specific policy.

In contrast to other options, a claims-made policy does not offer an indefinite reporting window nor does it ensure coverage beyond the active policy term unless specifically stipulated through additional provisions. This understanding is vital for individuals involved in insurance, particularly brokers, as they must communicate these details accurately to clients.