The Difference Between Claims Made and Occurrence Policies
Insurance can be intricate. It’s important as a fire sprinkler contractor to understand the ins and outs of a policy, often with an insurance professional to assist you.
Besides peace of mind, you’re putting your faith in your insurance company to pay any claims (minus any deductible) that you submit. One of the worst things that could happen is that you incur a claim and submit it only to find out that it will not be paid or only be partially paid.
How are claims paid out anyway?
Business insurance policies are usually written in one of two ways: As a claims-made or an occurrence forms policy. Before agreeing to buy any insurance, it would be good to understand the differences between the two.
Claims-made policies provide coverage for any claims that are submitted during the period the policy is in force. As long as you continue to pay premiums on the policy and any renewals, the coverage will be there for you.
However, once you stop paying the premiums (maybe because you have switched insurance companies, for example), the coverage ceases for any claim not yet known but that happened during the coverage period.
This means that you take the risk of an unknown claim, maybe for a sprinkler system you installed a few years ago, being made and not being covered because the claim was made outside the coverage period.
If you wanted to continue coverage after the original coverage period, you would need to purchase “tail coverage” (also called an extended reporting endorsement). This can be expensive but would extend out the claims reporting period after the policy period has ended.
Occurrence Form Policy
This type of policy protects you now and in the future for any claims that get submitted for any time period that was once covered. As you might suspect, this coverage is more expensive (as much as 35 to 50% extra) than a claims made policy.
One other thing to remember about this is that the coverage is only for the amount you had under the policy during the time period the claim occurred. That may be lower than your current policy limits.
Even so, many experts recommend the occurrence form for most businesses.
USA Insurance for Fire Sprinkler Contractors
USA Insurance will customize your insurance program to your business including the type of claims coverage you want and make it as affordable as possible for you. Contact us today for a no obligation quote.