Two liability policies can insure similar professional or business risks but respond very differently because of one word in the form: trigger. The trigger determines which policy year must answer when an incident happens on one date and a claim arrives months or years later.
The Texas Department of Insurance explains the basic distinction: occurrence policies cover incidents that happen during the policy period regardless of when the claim is filed, while claims-made policies depend on the incident and claim/reporting timing required by the contract.
Occurrence policy: focus on when the event happened
Imagine a contractor completes work in 2026 and a covered event occurs in December 2026. The customer files a lawsuit in 2028. If the relevant liability policy is occurrence-based, the 2026 policy may be the policy to review because the triggering event happened during that term.
The policy still has to cover the type of claim, and limits and exclusions still apply. “Occurrence” does not mean every future lawsuit is covered.
Claims-made policy: focus on when the claim is made and reported
Professional liability, D&O and other specialty liability products often use claims-made structures. A current policy may respond to an earlier act only if the claim is first made within the required period and the act falls on or after the applicable retroactive date, subject to all other terms.
| Feature | Occurrence | Claims-made |
|---|---|---|
| Main timing focus | When the covered incident occurred | When the claim is made/reported plus applicable prior-acts rules |
| Retroactive date | Usually not the central mechanism | Often critical |
| After policy cancellation | Past occurrences may still generate later claims | New claims may need tail/extended reporting or replacement coverage |
| Switching insurers | Old policy can remain relevant for old occurrences | Continuity of prior-acts protection is essential |
What is a retroactive date?
The retroactive date establishes how far back covered acts can occur under many claims-made policies. If a wrongful act took place before that date, a later claim may fall outside coverage even if the claim is reported during the current policy term.
For a continuously insured business, preserving the original retroactive date when moving carriers can be extremely important.
What is tail coverage?
“Tail coverage” commonly refers to an extended reporting period. It allows certain claims to be reported after a claims-made policy ends, provided the underlying act occurred within the covered period and all policy conditions are satisfied. A tail does not normally extend the time in which new wrongful acts are insured; it extends the reporting window.
What is prior-acts coverage?
A replacement claims-made insurer may agree to cover qualifying acts that occurred before the new policy’s start date, typically back to a specified retroactive date. That is often called prior-acts coverage. It can be an alternative to buying a tail in some transitions, but the two mechanisms should not be assumed equivalent.
Where coverage gaps happen
- A claims-made policy is cancelled before a claim is reported.
- A new policy has a later retroactive date than the old policy.
- A known circumstance is not reported when required.
- The business switches from claims-made to occurrence without planning for prior acts.
- A professional retires or sells a practice without arranging an extended reporting period.
- The policy requires reporting within the policy period and the notice arrives too late.
Questions to ask before switching liability insurers
- Is the current form claims-made, claims-made-and-reported, or occurrence?
- What is the retroactive date?
- Will the replacement policy preserve full prior-acts coverage?
- Is an extended reporting period available, and for how long?
- Are there known incidents or circumstances that should be reported now?
- How do the old and new limits apply to later claims?
Frequently asked questions
Which is better: claims-made or occurrence?
Neither is universally better. They allocate timing differently and are common in different insurance lines. The important issue is understanding continuity and the trigger.
If I had coverage when I did the work, am I always protected?
Not under a claims-made policy. The claim and reporting timing, retroactive date and other terms can be decisive.
Does tail coverage insure new work after cancellation?
Generally no. It extends the period for reporting certain claims arising from acts within the covered period; it is not a new policy for future acts.
Can I lose prior-acts coverage when changing insurers?
Yes. A changed retroactive date or different terms can create a gap, so continuity should be reviewed before the switch.
Sources & further reading
Reviewed against state insurance-regulator guidance in September 2026. Trigger language varies significantly; the actual policy wording controls coverage.
