Can I switch from a claims-made policy to an occurrence policy?

Yes, but it's increasingly difficult because occurrence policies are rare in professional liability insurance. If you make this switch, you'll need to purchase tail coverage on your old claims-made policy to protect against future claims for past work. The tail coverage typically costs 175-200% of your final annual premium. Ask your current insurer about availability and compare the total cost of tail coverage plus the new occurrence policy premium.

What happens if I let my claims-made policy lapse?

If you let a claims-made policy lapse without purchasing tail coverage, you lose protection for all the work you completed while insured. Any claims filed after your policy ends won't be covered, even if the incident occurred when you had active coverage. This creates significant personal liability risk, which is why tail coverage is essential whenever you end claims-made coverage—whether due to retirement, career change, or switching insurers.

How does a retroactive date affect my coverage?

Your retroactive date determines how far back in time an incident can occur and still be covered under your current claims-made policy. For example, if your retroactive date is January 1, 2020, and a claim is filed in 2025 for work you did in 2019, that claim won't be covered. Always maintain your earliest retroactive date when switching insurers—never let a new insurer reset it to a more recent date, as this creates coverage gaps.

Is tail coverage tax deductible?

Generally yes, tail coverage is considered a business expense and is typically tax deductible, just like your regular professional liability insurance premiums. However, tax rules can be complex and vary based on your specific business structure and situation. Consult with your tax advisor to confirm how tail coverage should be treated in your particular circumstances, especially if you're purchasing it as part of retirement planning.

Why do professional liability policies use claims-made instead of occurrence?

Claims-made policies became the standard for professional liability because they help insurers manage long-tail risks more predictably. Professional errors can take years to discover—a medical complication might not appear for five years, or a legal mistake might not surface until a case is appealed. Claims-made policies let insurers price risk more accurately and keep initial premiums lower, making coverage more accessible to professionals just starting their careers.

What's the difference between tail coverage and prior acts coverage?

Tail coverage (extended reporting period) extends the time you can report claims after your policy ends, covering past incidents. Prior acts coverage works in the opposite direction—it covers incidents that occurred before your current policy started, as long as they happened after your retroactive date and the claim is filed during your policy period. When switching insurers, you want prior acts coverage on your new policy to avoid gaps, potentially eliminating the need for expensive tail coverage on your old policy.

Claims-Made vs Occurrence Insurance Policies Explained

Here's something that catches most professionals off guard: the timing of when you file a claim can determine whether you're covered or facing a lawsuit on your own. If you're shopping for professional liability insurance—whether you're a doctor, lawyer, consultant, or contractor—you'll quickly run into two terms that sound confusingly similar: claims-made and occurrence policies. The difference between them isn't just insurance jargon. It's the difference between having coverage when you need it and discovering you're unprotected at the worst possible moment.

Let's break down what these policies actually mean, when each one makes sense, and what you need to know to avoid expensive surprises down the road.

How Occurrence Policies Work

Think of an occurrence policy as permanent protection for anything that happens during your coverage period. If you have an occurrence policy in 2025 and something goes wrong during that year—a patient injury, a construction defect, a professional mistake—you're covered. It doesn't matter if the claim comes five, ten, or even twenty years later. As long as the incident occurred while your policy was active, you can file a claim and your insurance will respond.

This makes occurrence policies incredibly straightforward. When your policy expires, you don't need to worry about buying additional coverage or maintaining relationships with your old insurer. You completed work in 2025 with occurrence coverage? That work is protected forever. This peace of mind is why occurrence policies remain the standard for general liability insurance—the kind contractors, retailers, and service businesses typically carry.

The catch? Occurrence policies cost more upfront. Insurance companies are taking on potentially decades of risk, and they price accordingly. But there's no tail to chase, no additional purchases required when you retire or change careers.

How Claims-Made Policies Work

Claims-made policies flip the script entirely. Instead of covering when the incident happened, they cover when the claim is filed. Your policy must be active at the moment someone makes a claim against you. This creates a timing puzzle that professionals need to understand—and plan for.

Here's how it plays out: Say you're a physician with a claims-made policy in 2025. You treat a patient in January, but complications don't arise until 2027. If you still have active claims-made coverage in 2027, you're protected. But if you retired, switched to a different insurer, or simply let your policy lapse? That claim won't be covered by your old policy because it wasn't made during the policy period.

The advantage of claims-made policies is cost—at least initially. First-year premiums can be significantly lower than occurrence policies. Insurers use what's called step-rating, where your premium starts low and increases annually for about four to five years before reaching a mature rate. In fact, you should expect your premium to roughly double from year one to year two, then continue climbing until the policy matures.

Today, claims-made is the dominant format for professional liability insurance. It's nearly impossible to find an occurrence-based legal malpractice policy, and the same goes for most medical malpractice coverage. If you're a professional seeking errors and omissions insurance or professional liability coverage, you're almost certainly looking at a claims-made policy.

The Critical Role of Retroactive Dates

If you have a claims-made policy, you need to understand your retroactive date. This is the cutoff date that determines how far back in time an incident can occur and still be covered under your current policy. Think of it as a coverage floor—your policy covers claims made during the policy period for incidents that occurred on or after your retroactive date.

Here's where professionals get tripped up: If you switch insurance companies and your new policy sets a retroactive date that's more recent than your previous coverage start date, you've just created a gap. Work you completed before the new retroactive date won't be covered, even if you had insurance at the time you did the work.

The golden rule: Never reset your retroactive date. If you've maintained continuous coverage for many years, make absolutely certain your new insurer sets your retroactive date to the earliest date from which you've been continuously insured—not the inception date of your new policy. Some policies offer full prior acts coverage with no retroactive date at all, meaning the timing of the act or omission doesn't matter as long as the claim is made during the policy period.

Understanding Tail Coverage

Tail coverage—formally called extended reporting period coverage—is what bridges the gap when you end a claims-made policy. It's an endorsement that extends the time period during which you can report claims, even after your policy has expired or been canceled. Without it, you're exposed to claims arising from all the work you did while insured.

You'll need tail coverage in several situations: when you retire, close your practice, switch insurance carriers, or take a break from your profession. With more than half of physicians surveyed changing jobs or job types between 2022 and 2024, tail coverage has become increasingly relevant for mobile professionals.

The cost is substantial: typically 175-200% of your final year's annual premium, paid as a one-time expense. If your mature premium is $10,000 per year, expect to pay $17,500 to $20,000 for tail coverage. This is why occurrence policies, despite their higher annual cost, can end up being more economical if you don't stay with the same insurer long-term.

There's good news though: many reputable professional liability insurers will provide free tail coverage if you've been insured with them for three consecutive years and you're retiring. This makes loyalty valuable, so it's worth examining tail coverage options before you switch carriers or when retirement is still years away.

Which Policy Type Is Right for You?

If you're running a business that needs general liability coverage—think contractors, retail stores, or service businesses—you'll almost certainly get an occurrence policy, and that's perfectly appropriate. The coverage is straightforward and the long-term protection is valuable.

For professionals—doctors, lawyers, consultants, architects, engineers—you're likely working with a claims-made policy because that's what's available in today's market. The key question isn't really which type to choose, but how to manage a claims-made policy effectively. That means understanding your retroactive date, planning for tail coverage costs, and maintaining continuous coverage with the same insurer when possible.

Over a long career with continuous coverage, claims-made policies can save you money—research suggests about 35% less than occurrence coverage when you factor in tail costs. But if you're unsure how long you'll need coverage, or if you anticipate changing careers or insurers frequently, the math changes. In those cases, if an occurrence policy is available for your profession, it might be worth the higher upfront cost.

Taking Action on Your Coverage

Don't wait until you're changing jobs, switching insurers, or retiring to think about these issues. Pull out your current policy and find your retroactive date. Ask your insurance agent or broker to explain what tail coverage would cost if you needed it tomorrow. If you're planning to retire in the next five to ten years, ask whether your insurer offers free tail coverage for long-term policyholders.

If you're shopping for new coverage, get quotes that include tail coverage costs so you can compare apples to apples. A policy that looks cheaper in year one might be more expensive over the life of your career once you factor in premium increases and tail costs.

The difference between claims-made and occurrence policies might seem technical, but it directly affects your financial security and peace of mind. Understanding how these policies work—and planning accordingly—ensures you'll have the coverage you need when someone files a claim, not just when you think you're protected.

Claims-Made vs Occurrence Policies

Key Takeaways