What does "claims made" basis mean in insurance?

In the context of insurance, a "claims made" basis refers specifically to the requirement that the insurance policy must be active at the time a claim is made for coverage to apply. This means that if a claim arises from an event that occurred while the policy was in effect, the insurer will only consider it if the policy is still active when the claim is filed.

This type of coverage is particularly significant in professional liability and malpractice policies, as it emphasizes the point at which the claim is reported rather than when the incident occurred. Thus, if a professional’s policy has lapsed or is no longer in effect when a claim is reported, the insurer will not cover the claim, regardless of when the incident leading to the claim actually took place. This creates a clear demarcation for liability and emphasizes the importance of maintaining coverage throughout the potential duration of liability.

The other choices may refer to different scenarios within insurance coverage. For instance, events occurring while the policy is active might be relevant for "occurrence" policies, not "claims made" policies. Understanding this distinction is crucial for navigating the nuances of insurance contracts.