| |
Claims-Made |
Occurrence |
|
Limits of
Coverage |
Coverage
will respond to incidents
arising on or after the
policy retroactive date
and which are reported
during the term of the
policy. |
Coverage
will respond to incidents
arising from the coverage
period - regardless of
when those claims are reported. |
|
Prior
Acts-or
Retroactive
Coverage |
Policy
may be endorsed to respond
to incidents which occurred
before the policy start
date. also referred to
as policy retroactive
date. |
No
Prior Acts coverage is
needed. |
|
Extended
Reporting
or
Tail
Coverage |
Tail
coverage responds to
cover incidents that
have not been reported
to the company during
the policy term. Some
companies will offer
a free tail at retirement,
subject to certain conditions. |
No
Tail coverage is needed
because incidents that
occurred during the policy
period are covered no
matter how much later
they are reported. |
|
Cost |
Claims
made coverage involves
a step process with
premium increases over
the first five years
of coverage in increments
proportional to the
claims reporting for
that experience. The
initial premium and
subsequent years' premium
are substantially lower
than an occurrence
policy. By the fourth
or fifth year the claims
made premium reaches
a mature level and
premium adjustments
are based on annual
rate changes only. |
Occurrence
coverage tends to be very expensive because the insured is prepaying
for tail costs whether the tail gets used or not. |
