What’s the Difference Between “Claims Made” and “Occurrence” Coverage?
From time to time we get calls from our ministries asking us if they can save money with a “claims made” policy. In some instances, the answer might seem like “yes,” but the answer is really “no.”
Let’s take a look at the difference between occurrence and claims made coverage according to a major carrier that caters to ministries.
Occurrence: “Pays claims arising out of covered incidents that occur during the policy term, even if they are filed many years later.”
Claims Made: “A coverage form for insurance that pays for claims presented to the insurer during the term of the policy or within a specific time period after its expiration.”
Occurrence coverage is typically higher in cost … that’s because the policy would respond for any claim that is brought up, no matter when it is filed. A great example involves the development of the #MeToo culture; more frequently we are seeing claims being made from many years ago … only an occurrence policy will respond on a permanent basis.
A claims made policy is less expensive in early years, and only responds while that policy is in force. The claims made is cheaper initially, but it’s only temporary coverage.
What’s better for your ministry? Only occurrence will keep your ministry protected in the long run. Look for an umbrella that extends over the Directors & Officers policy. You’ll want a total amount of at least two million dollars to cover the defense and assets of your board members. Some insurance companies may come in trying to lower their price by not including D&O in the umbrella, but that just sets your ministry up for trouble in the future. Also, be sure to ask your agent if your carrier is rated A and stable, even an A- rating means a less stable carrier and more difficulty for you when it comes to your ministry’s coverage and service.
You can read a great case study on the dangers of Claims Made can be found, here: Traps Await the Unwary in Claims Made Insurance Policies.