Occurrence vs. Claims-Made Professional Liability Insurance: Which is Right for You?
Insurance becomes incredibly important the day that you need it. You know that your fitness center needs liability insurance, but which type of policy is the right fit for you? In your research, you may have come across occurrence insurance policies and claims-made insurance policies. Understanding the differences between these two choices will help you to make an informed decision that provides your business with the best possible protection.
Occurrence insurance policies provide coverage for incidents that occurred during the policy year. When you have occurrence insurance, it does not matter when the claim is filed. A lifetime of coverage is provided for that incident. Premiums usually will not rise unless there is a change in rating category or occupation. A client could file a claim today, stating that training at your facility two years ago resulted in a back injury. Since the occurrence policy was in effect during the time of the incident, you will be covered, even though you no longer have that policy.
These occurrence policies have limits placed upon them. Limits are refreshed each cycle of the policy so that claims paid for incidents arising during the policy year do not deplete limits available for other years and other potential claims.
One benefit of occurrence insurance is that tail coverage is not required. Tail coverage essentially covers gaps of time. Tail coverage is used for incidents that occurred while an exchange was happening. Your coverage may lapse for a number of reasons, such switching carriers or forgetting to renew. It provides an extended reporting period. This may sound good (a reliable back-up, just in case), but tail coverage is very expensive. With occurrence policies, tail coverage is unnecessary, as you already have a lifetime of coverage for any incidents during the policy period – regardless of the date of the claim.
Claims-made policies only cover incidents that are reported during the policy period. Premiums increase each year until the policy matures, usually about five years (but this number may vary). For a past incident to be covered, a “tail” would be required. As mentioned above, tail coverage is an added expense. Claims-made policies do not refresh every year. The limit that is established at the beginning of the policy is the total limit for the entirety of the policy’s life. If your policy lapses and an incident occurs during this gap, you would not be covered. For this reason, claims-made liability insurance is less expensive than occurrence policies. However, recall the added expense of the tail coverage.
How to choose between Occurrence vs. Claims-Made Insurance?
Both policies have benefits and withdrawals that you should research and consider. Neither is a “wrong” choice; it is simply a matter of which policy is right for your fitness center. Here at FitSecure Insurance Group, we recognize the unique perils and risks related to businesses in the fitness industry, and our agents offer a level of proficiency unavailable anywhere else. We are here to answer any questions you have – reach out to us at 844-659-1881.