This coverage protects your business from claims arising from alleged bodily injury, personal injury or property damage liability. It includes protection for services you render or products you sell. Coverage payments can include judgments, attorney fees, court costs, or other related expenses.
Components of the General Liability Policy
- Premises and Operations
- Fire Damage Coverage
- Personal Injury Liability
- Advertising Injury Liability
- Medical Payments
- Products and Completed Operations
CLAIMS-MADE INSURANCE VS. OCCURRENCE POLICY
Claims-Made Insurance is Restrictive
A Claims-Made Policy requires that the claim must occur and be reported during the policy period, unless you keep your insurance with the same insurance company year after year after year. That handcuffs you to one insurance company and prevents you from changing companies — if you do, a claim that occurred one year and develops into a suit several years later, will not be covered. To maintain protection when switching insurance companies you must either purchase extended reporting or “tail” coverage (can be expensive) or purchase “full prior acts coverage” from the company to whom you are switching. Not all insurance companies offer “prior acts coverage.”
Occurrence Policies Offer Long-Term Coverage
If you have an Occurrence Policy, it doesn’t matter when you report the claim as long as there was a policy in existence when the claim occurred. You can switch companies any time. The policy that was in force when the claim occurred reaches out to cover the claim. Furthermore, when an occurrence policy expires, the premiums stop, while the coverage (on occurrences that happened during the policy period) continues forever.
An occurrence policy allows you to change companies from a Claims-Made Policy to an Occurrence Policy for better coverage or rates as long as you purchase Tail Coverage or move to a company that offers Full Prior Acts.
Full Prior Acts Coverage
When switching from a claims-made policy to an occurrence form, you purchase Full Prior Acts Coverage. This covers claims arising from professional liability from the date you started practicing until long after you retire. This prevents the expense of having to purchase tail coverage year after year.
Tail coverage picks up where a claims-made policy leaves off, covering occurrences while the policy was effective, but claimed after the policy was expired. Tail coverage insures you after your claims-made policy expires. You continue to pay for it until you decide that the risk of discovering an old occurrence no longer outweighs the cost of the tail coverage premium.