Occurrence policies cover losses that occur during the time the policy is active, regardless of when the claim is filed. These types of contracts give the insured party the right to request compensation for damages incurred within the policy's period of validity, even if several years have passed and the contract is no longer active. An occurrence policy provides coverage long after the policy has expired, which is a major advantage. Moreover, while claims-made policy aggregate limits do not reset, occurrence policy aggregate limits reset every year.
With occurrence policies, coverage may last long after the policy has expired. In other words, it is possible to receive financial protection on claims that occurred even years after the policy period, so long as the insured can show that the claim event took place during the benefit period of the policy. As a general rule, occurrence policies will cover the insured for life, regardless of how long has passed since the policy was terminated.
Occurrence policies have been designed to cater to events that may lead to damages after the fact. For instance, imagine an accident involving a spill of hazardous chemicals. One may not expect to see the dangerous effects of the chemicals until years after the spill took place.
Generally, when choosing an insurance policy, there are three main factors to consider: the type of coverage you need, the time frame you want protected, and the overall cost of coverage. Choosing the right insurance policy begins with understanding the key characteristics of occurrence policies and claims-made policies, but the differences between these two policies are a bit complicated. Get in touch with an insurance attorney as soon as possible if you need assistance with your insurance policy.