claims made policy
Definition
A claims made policy is a type of insurance that only covers you if both the incident and the claim against you happen while your policy is active. This means if someone sues you after your policy expires for something that happened while you were covered, your insurer can refuse to pay.
Example
You carry a claims made policy in 2022 and 2023, a client gets injured in late 2022, but they wait until 2024 to sue you after your policy lapsed, and your old insurer owes you nothing.
Watch Out
When you cancel or switch a claims made policy, ask your insurer about purchasing 'tail coverage,' which extends your protection for lawsuits filed after your policy ends.
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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.