Tom's Blog

Difference Between Occurrence Versus Claims-Made Insurance

As a business owner, you know the importance of having the right business insurance protection, but understanding the different types of insurance can be confusing. Before you invest in any type of business insurance protection, it is essential to know the difference between occurrence and claims-made insurance so you can get the type of insurance that best suits your business needs at an affordable rate.

What Are Your Business Needs?

Each business is different, so the type of insurance that best suits your needs may differ from the next business owner. Some of the biggest distinctions between claims-made insurance and occurrence-based insurance include, but are not limited to:

• With a claims-made policy, your coverage is triggered when a claim is made or filed against you during the policy period. Essentially, you must have active insurance to file a claim with this type of policy.
• In contrast, with an occurrence-based insurance policy, coverage for bodily injury and property damage claims applies as long as you were insured when the loss occurred. Most businesses prefer occurrence-based insurance as it considers losses that may not present themselves immediately. For example, a slip-and-fall victim may seem uninjured initially, but a year later, you may be hit with a lawsuit and a bodily injury claim.
• Regarding your business policy limits of liability, a claims-made policy provides insurance protection for an amount chosen, but this selected amount of liability coverage must last for the entirety of your policy, unless you choose to increase your limits in the next year. For example, if you elect $1 million of liability coverage and experience a catastrophic loss, that $1 million of coverage must last for the duration of your policy.
• However, with an occurrence-focused policy, your limits of liability are reset every year at renewal. For example, if you have an aggregate $1 million liability limit, this is the most your insurer will pay out towards all claims, but there is also a “per occurrence” amount of money which represents the most your insurer will pay per occurrence or per loss.

Occurrence Versus Claims-Made: Which Insurance Fits Your N.C. Business Needs?

As a new business owner, you may lean towards the lower cost of the claims-made policy, particularly if you don’t plan to cancel your insurance policy. But if you are an established business owner, you may prefer the benefit of having broader coverage protection offered by the occurrence-based insurance. The larger your business, the more you are exposed to larger risk exposures, and having more expansive coverage may be appealing despite a higher cost.

Paramount Insurance Agency understands the importance of having the right type of insurance suitable for your specific N.C. business needs at an affordable rate. Call us TODAY at 336-869-3335.