claims made basis
Definition
A claims made basis is a type of insurance policy that only covers you if both the incident that caused the claim AND the actual claim filed against you happen while your policy is active. This is different from occurrence-based insurance, which covers any incident that happened during the policy period no matter when someone actually sues you.
Example
If a client was injured by your work in 2022 but didn't sue you until 2024, a claims made policy would only pay out if you still had that same policy active in 2024 when they filed the lawsuit.
Watch Out
If you cancel a claims made policy, you could be completely unprotected against old incidents that nobody has sued you for yet, so ask your insurer about buying 'tail coverage' before you cancel.
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This definition is for informational purposes only and does not constitute legal advice. Please consult with a licensed attorney for legal guidance.