What is the difference between claims-made and occurrence-based cover?

Which policy responds — the one in force when the incident happened, or the one in force when the claim is made. It is the single most consequential distinction in liability insurance, and it determines whether you are covered years later.

Occurrence-based cover. The policy in force when the incident occurred responds, regardless of when the claim arrives. An incident in 2015 is covered by the 2015 policy, even if the claim is made in 2026.

The advantage: once a policy year has passed, that year is covered permanently. You can stop buying insurance and remain covered for what happened while you had it.

Typical of: public liability and employers' liability.

Claims-made cover. The policy in force when the claim is made against you responds — provided the incident occurred after a stated retroactive date.

The consequence, which is the part that catches people out: you must maintain continuous cover. If you stop, claims arising from work you did while insured are not covered, because there is no policy in force to respond to them. The past cover does not follow you.

Typical of: professional indemnity, directors' and officers' liability, and medical malpractice.

Why these lines use claims-made. Professional errors surface long after the work — an error in advice may emerge years later. Occurrence-based cover would require insurers to reserve indefinitely for unknown future claims on old policies, which is difficult to price.

The two terms that matter on a claims-made policy:

Retroactive date. Claims are covered only where the incident occurred after it. Losing your retroactive date when changing insurer creates a gap covering all your earlier work — so preserving it on renewal or a switch is essential and is frequently overlooked.

Run-off cover. Where you cease trading, retire or sell the business, run-off continues the claims-made cover for a period — commonly six years, matching limitation periods — so later claims are still met. Without run-off, retiring means losing cover for an entire career's work, which is why it is a standard requirement in regulated professions and in the sale of a business.

What to check: your retroactive date; continuity on every renewal; and whether run-off is available and at what cost.

General information, not advice.