Directors’ and Officers’ Insurance Claims Made vs. Occurrence Policies

As a business owner, protecting your company from potential legal issues is vital to its success. One way of doing this is by obtaining insurance coverage for directors and officers (D&O). However, choosing the right policy can be confusing, especially when it comes to understanding the differences between claims-made versus occurrence policies. In this blog post, we'll break down everything you need to know about D&O insurance and help you make an informed decision on which type of policy is best suited for your company's needs. So, let's dive in!

Introduction to Directors and Officers (D&O) Insurance

As a business owner, you want to make sure that your company is protected from any legal liability that may arise. This is where directors’ and officers (D&O) insurance comes in. D&O insurance protects the individuals who serve on the board of directors and executive officers of a company from personal financial losses if they are sued for wrongful decisions or actions while in their corporate roles.

There are two types of D&O policies: claims-made and occurrence. Claims-made policies provide coverage for claims that are made against the insured during the policy period, regardless of when the actual incident occurred. Occurrence policies, on the other hand, cover incidents that take place during the policy period, even if the claim is not made until after the policy has expired.

So, which type of D&O policy is right for your business? It depends on several factors, including the size and complexity of your organization, the industry you operate in, and your risk tolerance. If you're not sure which type of policy is right for you, speak to an insurance broker who specializes in D&O coverage.

What Is the Difference Between Claims Made and Occurrence Policies?

When it comes to directors’ and officers’ insurance, there are two types of policy forms that insurers use: claims made and occurrence. So, what’s the difference between the two?

A claims-made policy only provides coverage for wrongful acts that occur while the policy is in force. In other words, if you have a claim-made policy and an incident happens after your policy has expired, you will not be covered.

An occurrence policy, on the other hand, provides coverage for wrongful acts that occur during the policy period, regardless of when the claim is made. So, if you have an occurrence policy and an incident happens after your policy has expired, if the incident occurred during the time your policy was in force, you will be covered.

There are pros and cons to both types of policies. Claims-made policies tend to be less expensive because they only cover incidents that happen while the policy is in force. However, they may not provide coverage if a claim is made after the policy has expired. Occurrence policies are typically more expensive, but they provide peace of mind knowing that you’re covered even if a claim is made years down the road.

Ultimately, it’s up to you to decide which type of policy is right for you and your organization. If you’re Unsure which one to choose, speak with your broker or insurance agent to get their professional opinion.

When Should You Use an Occurrence Policy?

If your organization is sued for wrongful acts that occurred in the past, an occurrence policy will protect you. Claims made policies only protect you from claims made during the policy period. So, if you have an occurrence policy in place and are sued for something that happened in the past, your organization will be covered.

How Do I Know Which Policy Is Right for My Organization?

There are a few key factors that you should take into account when trying to determine which policy is right for your organization. The first is the size of your organization. If you have a large organization, then you will likely need a more comprehensive policy. The second factor is the type of business you are in. If you are in a high-risk industry, then you will need a policy that covers more risks. Lastly, you should consider your budget. You want to make sure that you can afford the policy you choose.

Conclusion

Directors and Officers insurance policies are an important tool to protect business leaders from personal liability. Understanding the differences between claims made vs. occurrence policies is key in choosing the right policy for your company's needs. Claims made policies cover claims that are reported during the policy period while occurrence policies cover any incident that happened within a certain time frame regardless of when it is reported. By understanding these differences, you can make sure you have adequate protection for your business and its leadership team.