Claims-made vs occurrence policies: how the two liability triggers work

An occurrence policy covers injury or damage that happens during the policy period, no matter when the claim is filed, even years later. A claims-made policy covers a claim only when it is made during the policy period, and the injury or damage must also fall on or after the policy's retroactive date. The first asks "when did it happen?" The second asks "when was the claim made?" That single question decides which policy pays.

This sounds like a fine point, but it is one of the most reliable places to lose marks on the Texas property and casualty exam, and one of the most expensive mistakes a new agent can make for a client. A business that drops a claims-made policy without arranging tail or prior acts coverage can face a claim for something that happened while it was fully insured, and find that no policy responds.

What is the difference between claims-made and occurrence policies?

The difference is the coverage trigger: the event that decides which policy year a loss belongs to.

The Texas Department of Insurance puts it plainly in its commercial general liability guide: occurrence policies cover injury or damage that happens while the policy is in force, regardless of when the claim is first made, and claims-made policies cover injury or damage that happens during the policy period and is reported to the insurer during the policy period.

Think of the occurrence form as a record of the day the damage happened. Think of the claims-made form as a door that is only open while the policy is in force. A claim has to walk through the door while it is open.

How does a claims-made policy work in practice?

Take a small retail store. A customer slips in the showroom in March and says they are fine. In November, after the store's policy has expired and the owner has not renewed, a lawyer's letter arrives.

• Under an occurrence policy that was in force in March, the claim is covered. The fall happened during the policy period, and the later claim date does not matter.
• Under a claims-made policy that expired before November, the claim is not covered, because it was made after the policy ended. If the owner had bought an extended reporting period when the policy expired, the claim may be covered.

TDI uses almost exactly this example in its guide. The point is that the business was insured on the day of the accident in both versions. Only the form decides whether that matters.

What is a retroactive date?

The retroactive date is the earliest date on which an injury or wrongful act can have happened and still be covered by a claims-made policy. It appears on the declarations page. It may be the same as the policy's effective date, or an earlier date.

When a business renews a claims-made policy with the same insurer year after year, the retroactive date normally stays fixed at the start of the first policy. That is what lets a claim made this year for something that happened three policy years ago still be covered. TDI calls an earlier retroactive date prior acts coverage, sometimes nicknamed "nose" coverage, because it reaches backward to events before the current policy began.

There is one limit worth memorizing. Prior acts coverage does not cover claims the insured already knew about when the policy began. A retroactive date protects against unknown past events, not known ones. Insurers ask about known incidents on the application for exactly this reason.

On the exam, a question that gives you a retroactive date is almost always a claims-made question. Draw a quick timeline: retroactive date, injury date, policy period, claim date. The claim is covered only if the injury falls on or after the retroactive date and the claim lands inside the policy period or an extended reporting period.

What is tail coverage, or an extended reporting period?

Tail coverage, formally an extended reporting period, lets the insured report claims after a claims-made policy ends, as long as the injury happened after the retroactive date and before the policy ended.

TDI describes the usual pattern this way. A typical claims-made policy gives a short reporting period of 30 or 60 days after expiration for claims that arose too late to report. A longer tail can then be bought for an additional premium, and that extended reporting period may be one, three or five years, or even unlimited. Those lengths are what TDI calls typical, not legal minimums.

Texas does set minimums. TDI's form review checklist for commercial general liability requires that a claims-made policy filed in Texas:

1. Shows a claims-made disclosure in plainly readable bold type on the declarations page or the first page of the policy.
2. Gives the insured an automatic extended reporting period of at least 30 days for claims that become known too late to report before the policy ends.
3. Tells the insured they have a right to buy an extended reporting endorsement, gives them a minimum of thirty days to buy it, and makes the purchased extended reporting period at least one year.

The same requirements appear on TDI's checklists for personal liability and miscellaneous professional liability forms, so they are not limited to general liability.

What is the difference between claims-made and claims-made and reported?

A plain claims-made form needs the claim to be made against the insured during the policy period. A claims-made and reported form, which you will see on many professional liability policies, adds a second step: the insured must also report the claim to the insurer during the policy period or any extended reporting period.

The practical risk is a claim that arrives near the end of the policy year and sits on a desk. Under a claims-made and reported form, a claim made in time but reported late can be denied. The automatic extended reporting period Texas requires helps here, because it gives a short window after the policy ends to report claims that became known too late.

Can you switch from occurrence to claims-made, or back?

Occurrence to claims-made is the easy direction. The old occurrence policies still respond to anything that happened while they were in force, however late the claim arrives. The new claims-made policy usually starts with a retroactive date equal to its own effective date, so there is no gap and no overlap.

Claims-made to occurrence, or claims-made with one insurer to claims-made with another, is where gaps appear. The new occurrence policy covers only events from its start date forward. The old claims-made policy covers only claims made while it was in force. Anything that happened under the old policy but is claimed later falls between the two.

TDI's guidance is to close that gap one of two ways when a claims-made policy expires, cancels or nonrenews: buy tail coverage from the previous insurer, or buy prior acts coverage from the new one. Its medical liability guide adds a warning that particular care is needed when retiring or changing insurers, and notes that most companies on its list write medical liability on a claims-made basis.

Which is better, claims-made or occurrence?

Neither is better in the abstract. They solve different problems.

Occurrence forms suit risks where injuries show up fast and claims follow soon after, such as a slip in a store. The insured buys a policy each year and never has to think about tails. Most commercial general liability is written this way.

Claims-made forms suit risks where claims surface long after the act, such as professional errors and medical treatment. An insurer writing occurrence cover for those risks would have to price claims that may arrive many years later. Claims-made lets the insurer price each year on the claims it can actually see, which is why TDI notes these policies may be cheaper in their early years and rise as policy years accumulate. The trade-off is that the insured has to manage the retroactive date and buy a tail when the policy ends.

Does claims-made vs occurrence appear on the Texas P&C exam?

Yes, by name. The general knowledge part of the Pearson VUE content outline lists "Occurrence" as a basic insurance term, and its commercial general liability section lists Coverage A as bodily injury and property damage liability, "Occurrence, Claims made including Retroactive Date". That is why it turns up both as a definitions question and as a scenario question about who pays.

Expect timeline questions. You will be given an injury date, a claim date, a policy period and sometimes a retroactive date, and asked whether the policy responds. Work through the timeline in the same order every time and the questions become mechanical. The CGL coverage parts themselves are covered in our commercial package policy explainer, since general liability is usually one part of a package.

What this means for you

As a candidate, learn the trigger first and the vocabulary second. Occurrence equals the date of injury. Claims-made equals the date of the claim, inside the policy period, after the retroactive date. Tail extends the back end; prior acts extends the front end.

As a new agent, the stakes are real. A client with a claims-made policy who retires, sells the business or changes insurers needs a conversation about tail or prior acts coverage before the policy lapses, not after a claim arrives. Check the declarations page for the retroactive date at every renewal, and make sure it carries over when you move a client to a new carrier.

If you want to test yourself on timeline questions like these, try the free Texas P&C practice questions, or work through the full Texas property and casualty course, which covers commercial general liability coverage by coverage.

Frequently asked questions

What is the main difference between claims-made and occurrence?

The trigger. An occurrence policy covers injury or damage that happens while the policy is in force, even if the claim is filed years later. A claims-made policy covers a claim only if it is made during the policy period, and the injury must have happened on or after the retroactive date shown on the declarations page.

Does an occurrence policy need tail coverage?

No. An occurrence policy keeps covering any injury or damage that happened during its policy period, however late the claim is filed. Tail coverage, or an extended reporting period, exists only for claims-made policies, because they otherwise stop responding to claims made after the policy ends, even for events that happened while they were in force.

What happens if a claims-made policy is canceled?

Coverage for new claims stops when the policy ends. Texas requires an automatic extended reporting period of at least 30 days for claims that became known too late to report, and the insured must be offered a longer extended reporting endorsement. To avoid a gap, buy tail from the old insurer or prior acts coverage from the new one.

Is a retroactive date the same as the policy effective date?

Not necessarily. The retroactive date may equal the effective date of the first claims-made policy or be an earlier date that buys prior acts coverage. On renewal with the same insurer it usually stays fixed, which keeps older events covered. Prior acts coverage still excludes claims the insured knew about when the policy began.

Is medical malpractice insurance claims-made or occurrence?

It can be either, but claims-made is far more common. TDI's medical liability shopping guide warns that most companies on its list issue policies on a claims-made basis and that claims may not be covered unless they occur and are reported within the policy's effective period, so retiring or changing insurers needs careful planning.

Which is cheaper, claims-made or occurrence?

A claims-made policy is often cheaper in its early years, because the insurer only faces claims made during the policy period after a recent retroactive date. TDI notes the cost tends to rise as policy years accumulate. An occurrence policy is priced from the start for every future claim arising from that year's events.