Claims-Made Vs. Occurrence Policies: What Coverage Is Right For You?

In today's increasingly litigious business environment, managing liability risk has never been more critical. Owners of real estate businesses, general contracting firms, landscaping companies, and other organizations frequently purchase commercial general liability (CGL) insurance as their first line of defense against unforeseen incidents and claims.

However, not all coverage is created equal—and the distinction between claims-made and occurrence policies represents one of the most consequential decisions in your risk management strategy.

For property managers handling dozens of vendor relationships or general contractors coordinating multiple subcontractors across job sites, understanding these policy distinctions is a critical component of comprehensive risk management. One missed detail in your insurance coverage could potentially expose your business to millions in liability.

The complexity compounds when you're also responsible for tracking certificates of insurance (COIs) from all your vendors and subcontractors. Each of these third-party relationships brings its own insurance considerations, creating a web of policies that must be properly verified and monitored to ensure continuous protection.

Let’s break down both claims-made and occurrence policies so you can ensure appropriate coverage when you need it most and build safer business connections through proper risk transfer. We'll explore the fundamental differences, examine industry-specific considerations, and address common coverage gaps that could leave your business exposed.

Key Takeaways

• While occurrence policies protect against incidents during coverage regardless of when claims arise, claims-made policies only cover events when both incident and claim happen within the policy period.
• Without tail coverage, businesses face significant liability risk. This critical extension protects against claims filed after a claims-made policy ends.
• Different industries need different approaches. Construction benefits from occurrence policies, property managers require consistent coverage for tenant issues, and healthcare typically relies on structured claims-made policies.
• Watch for coverage gaps! These include "sunset" problems, retroactive date issues, missed notice deadlines, geographic limitations, and poor vendor verification.

What Are Claims-Made Policies?

Claims-made insurance policies are a specific type of coverage where protection is provided for claims made and reported to the insurer during the policy period. Unlike occurrence-based policies, which cover events that happen during the policy period, claims-made policies require both the alleged incident and the claim to occur within the policy's timeframe.

These policies often have a retroactive date. Claims arising from incidents before this date may not be covered. Additionally, if a policy is canceled or a premium isn't paid, any claim that comes through will not be covered—even if the incident occurred during the policy period.

Example: Bob the businessman purchased claims-made insurance in 2018 and continued coverage through 2020, then canceled it. He does not purchase any extension—or, tail coverage—to extend its original limits. In 2021, Bob was sued for an incident that occurred in 2019. Since the claims-made policy is no longer in effect and he did not purchase tail coverage, Bob is the liable party—meaning he is obligated to pay for damages, as his former insurance carrier does not cover it.

How Can Tail Coverage Enhance Your Policy?

Also known as an extended reporting period (ERP), tail coverage is an additive option that extends the limits of claims-made coverage indefinitely, and becomes available only after a policy has been terminated.

This endorsement protects policyholders from past incidents and covers claims filed after expiration or cancellation.

Example: Bob the businessman purchased claims-made insurance in 2018 and continued coverage through 2020, then canceled it. He then adds tail coverage. In 2021, Bob was sued for an incident that occurred in 2019. Since he was continuously covered at the time of the incident and purchased extended coverage, his old insurance carrier is still liable to pay for the suit, even though the original policy is no longer in effect.

What Are Occurrence Policies?

Occurrence policies cover events happening during the policy period, regardless of when claims are filed. Unlike claims-made policies, the trigger for coverage is the occurrence of an event rather than the timing of the claim report.

Occurrence policies have no retroactive date, providing simplicity and long-term clarity regarding the incidents covered. This type of insurance will provide coverage even if the claim is filed after cancellation, as long as the incident occurred within the time frame set by the initial policy. These are commonly used in general liability insurance, such as commercial general liability (CGL) policies, as well as in some other liability insurance categories.

Example: Bob the business owner purchased an occurrence policy in 2018 but switched to a new form of coverage in 2023. Bob got sued in 2025 for an incident that occurred in 2020. In this case, Bob is still covered by his original occurrence policy because it was active at the time of the incident.

Industry-Specific Considerations for Claims-Made Vs. Occurrence Policies

For Construction Companies

General contractors face unique challenges when selecting between claims-made and occurrence policies. The nature of construction work—with its inherent dangers and potential for latent defects—makes insurance coverage decisions particularly consequential.

• Project Completion Risks: Construction defects may not become apparent to you for years after project completion. An occurrence policy provides significant advantages here, as it covers incidents that occurred during the policy period regardless of when claims arise. This is particularly important for structural issues that might not manifest until long after the contractor has completed the project.
• Subcontractor Management: Managing subcontractors is complex, making you vulnerable to liabilities. General contractors typically work with numerous subcontractors, each with their own insurance policies. When tracking certificates of insurance for subcontractors, it's essential to verify not just coverage limits but also policy type. A subcontractor with a claims-made policy that lapses after project completion could leave you, the general contractor, exposed to liability for that subcontractor's work.
• Project-Specific Considerations: For large, multi-year projects, occurrence policies often provide more straightforward protection. However, claims-made policies with appropriate tail coverage can be structured to provide similar protection if properly managed through comprehensive COI tracking systems.

For Real Estate & Property Management

Naturally, property managers and real estate owners have different risk profiles that influence their insurance policy decisions.

• Tenant Relationships: Property managers dealing with multiple tenants need consistent coverage for incidents that might not be reported immediately. Occurrence policies generally provide clearer protection for tenant-related incidents that may be discovered after a tenant has vacated the property.
• Vendor Management: The diverse array of vendors providing services to properties—from landscapers to maintenance contractors—creates complex insurance tracking requirements. Property managers should ensure their COI tracking solution verifies whether vendors carry claims-made or occurrence policies to properly assess coverage gaps.
• Property Transitions: When properties change ownership or management, insurance considerations become particularly important. Occurrence policies provide clearer protection during these transitions, as they continue to cover incidents that occurred during the policy period regardless of when claims are filed.

For Healthcare Organizations

Healthcare facilities face even more specialized risk considerations that impact their insurance decisions.

• Medical Professional Liability: Most medical professional liability insurance is written on a claims-made basis. Healthcare organizations must be particularly mindful of tail coverage when practitioners leave the organization or when policies change.
• Extended Discovery Periods: Medical issues might not become apparent for months or years after treatment. Claims-made policies with appropriate tail coverage are standard in this industry, but must be carefully structured to address these extended discovery periods.

Common Insurance Coverage Gaps & How to Address Them

Even with appropriate insurance in place, businesses often encounter coverage gaps that leave them exposed to unexpected liability. Here are the most common gaps and strategies to address them. 

Gap 1: The Claims-Made "Sunset" Problem

The Gap: When a claims-made policy expires or is canceled without tail coverage, you lose protection for incidents that occurred during the policy period but haven't yet resulted in claims.

Solution: Always secure appropriate tail coverage when canceling or changing a claims-made policy. While this comes at an additional cost, it's significantly less expensive than facing an uninsured claim. Implement automated COI tracking systems that flag policies lacking proper tail coverage to ensure continuous protection.

Gap 2: Retroactive Date Limitations

The Gap: Claims-made policies typically include a retroactive date, before which incidents aren't covered. When switching insurance carriers, misalignment of these dates can create coverage gaps.

Solution: When changing insurance providers, ensure your new claims-made policy's retroactive date matches or precedes your previous policy's date. Document this carefully in your risk management system and verify it through your COI tracking process.

Gap 3: Notice Provision Pitfalls

The Gap: Claims-made policies typically require prompt notification of potential claims. Failing to report incidents within the specified timeframe can result in denial of coverage.

Solution: Implement clear incident reporting protocols within your organization. Train staff to recognize and report potential claim situations immediately. Use vendor management systems to track incidents and ensure timely reporting to insurers.

Gap 4: Coverage Territory Limitations

The Gap: Both policy types may have geographic limitations that don't cover incidents occurring outside specified territories—a particular concern for businesses operating across multiple regions.

Solution: Review policy language carefully for territory limitations. For businesses operating in multiple locations, consider endorsements that extend coverage to all relevant territories. Verify geographic coverage through your COI tracking process for all vendors and subcontractors.

Gap 5: Inadequate Vendor Insurance Verification

The Gap: Relying on vendors or subcontractors without properly verifying their insurance coverage type and limits can create significant liability exposure.

Solution: Implement a robust certificate of insurance tracking system that verifies not just the existence of insurance but also confirms policy types, limits, additional insured status, and appropriate endorsements. Automated COI tracking solutions can dramatically reduce the risk of overlooking critical details in vendor policies.

By understanding these common gaps and implementing appropriate risk management strategies, your business can significantly reduce its exposure to uninsured claims. Proper certificate of insurance tracking plays a crucial role in identifying and addressing these gaps before they result in costly liability issues.

Streamline Insurance Tracking & Vendor Management With bcs

Regardless of your insurance coverage, bcs full-service and self-service tracking solutions make managing third-party processes a whole lot simpler.

After hiring vetted vendors via the bcs network, seamlessly onboard them or encourage self-onboarding through the vendor mobile app.

Our frictionless certificate of insurance (COI) tracking solutions enable you to easily message tenants, highlight and correct deficiencies with AI-powered alerts, and guide wayward third parties back to compliance.

With capabilities that handle the full gamut of your vendor management processes, bcs does it all, so you don’t have to.

bcs is a leading, automated COI tracking solution offering self-service and full-service COI options, streamlined document storage, automated RFP broadcasting, and so much more. To learn more, schedule a demo or contact our team today.