Tom's Blog
As a small business owner, you understand the importance of insurance protection, but there are many facets to understanding what type of insurance policy best suits your specific business needs. It’s critical that before you actually purchase business insurance protection you understand the difference between occurrence versus claims-made insurance.
Assess Your Business Needs to Decide Which Policy is Best
Deciding which policy is best entirely depends on your specific business needs. Some of the biggest differences include the following, but not limited to:
- With an occurrence-based policy, you are protected as long as you were insured when that loss happened. This type of policy takes into consideration situations/losses that may not present themselves until a later date, such as “long-tail” situations. For example, a lawsuit may be presented years after a loss or a claim has occurred.
- However, with a claims-made policy, your coverage only kicks in when you file a claim during the policy period. Simply put, you must have active insurance or you are ineligible to file a claim with a claims-made policy. Forgetting to pay your insurance premium or canceling your policy equates to being uninsured.
- Regarding policy limits, occurrence policies reset the aggregate limit every year. An aggregate limit is the maximum amount of money the insurer will pay towards all liability claims and a per-occurrence limit references the maximum amount allowed each time a loss occurs. For example, if you have an occurrence-based policy with an aggregate $1 million limit of liability and that has been exhausted due to a claim, you will get another $1 million of insurance protection upon renewal of your policy.
- However, with a claims-made policy, having the same insurance protection as above, you would no longer have any insurance protection once the $1 million is exhausted. Because of this, this type of insurance is generally cheaper so it may appeal to small business owners that are just starting out and don’t have the assets to allocate to more expansive coverage. With claims-made policies, the amount of coverage you purchase must last for the entirety of your policy unless you increase your limits in the next year.
Knowing the difference between occurrence versus claims-made insurance policies is necessary before you decide to purchase your business insurance.
Your N.C. Business Insurance Needs Are Paramount
Paramount Insurance Agency is here to assist you with your small business insurance and can guide you in determining whether occurrence or claims-made insurance best suits your N.C. business needs.
If you are a new business owner, you may prefer the lower cost benefit of the claims-based policy especially if you don’t plan to cancel your policy. However, there are many perks to the occurrence policy especially if you have many assets, along with a larger risk pool. It may be more costly but provides the peace of mind knowing if you experience multiple costly claims, you will have more expansive coverage.
Because we operate as an independent insurance agency, we can shop your coverage options to find the most suitable insurance at the most affordable rate to you. Call us TODAY at 866-869-3335 for all of your small business insurance needs.
