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

The correct choice highlights the fundamental distinction between claims-made and occurrence insurance policies. Claims-made policies are designed to provide coverage for claims that are made and reported to the insurer during the active policy period. This means that if an incident occurs, coverage will only be in effect if the claim is filed while the policy is active.

In contrast, occurrence policies offer coverage for incidents that occur during the policy period, regardless of when the claim is made. As long as the event that led to the claim took place during the active time of the occurrence policy, the coverage will be valid even if the claim is filed after the policy has expired. This leads to broader protection under occurrence policies because they can respond to claims long after the policy period has ended as long as the incident occurred during that time.

Understanding these definitions is critical for recognizing how different types of policies can affect coverage and the timeline for filing claims. This difference can have significant implications for both policyholders and insurers in managing risk and liability.