When looking to buy insurance, one of the most important things to understand about the policy is how that insurance will respond when a claim is filed. In the case of Professional Liability Insurance, there are two general types of policies offered: Claims Made Policy and Occurrence Policy. One major difference between a claims made policy vs an occurrence policy and how coverage applies lies in when the claim is filed.
As a professional athletic instructor or personal trainer, you’re skilled in giving instruction and doing what you can to match a customized fitness program with the needs of the trainee. In most cases, your training gets results, goals are reached and the success stories stack up.
But, what if a claim of improper or negligent instruction is brought against you by a client you once trained, years after your sessions ended. Will that claim be covered? It depends on the type of policy you were covered by at the time of the incident and whether it was a Claims Made Policy or Occurrence Policy.
What is a Claims Made Insurance Policy?
A Claims Made Policy provides coverage for claims that are made within the period that the policy is in force. It is common for Claims Made Policies to also contain a “reported” component which requires the claim also be reported to the insurer within the policy period. A claim filed after a Claims Made Policy expires is not covered unless you purchased “tail coverage” (or “tail”) at the time the policy expires. Tail coverage—also called an Extended Reporting Endorsement—offsets your risk of being uninsured for claims reported in the future by extending the period in which incidents that happened during the initial policy period can be reported, and covered.
Another aspect of a Claims Made Policy to be mindful of is what happens when you switch insurance carriers. Prior to buying a new Professional Liability Insurance policy from a different insurance carrier, one of two things should be done in order to ensure coverage for any claims reported in the future from incidents that happened during the original Claims Made Policy period:
- You purchase tail coverage from the insurance company of the first policy, or
- You purchase prior acts coverage from the insurance carrier of the new insurance policy. Prior acts coverage will provide coverage for your professional services, dated back to the assigned retroactive date. It’s a safeguard allowing you to continue this important coverage uninterrupted and will help ensure you are covered for your past professional services.
What is an Occurrence Insurance Policy?
Occurrence policies are simpler to understand because they coverage trigger for incidents is when they occurred, regardless of when they are reported. As long as you have an Occurrence Policy in force at the time an incident occurs, the incident will be covered, no matter when the claim is made and reported—and you do not have to maintain continuous insurance coverage for a claim to be covered.
Premium and Coverage Comparison
The following considerations may be helpful to decide which type of policy is best for you.
Cost
The annual premium for a Claims Made Policy is typically much less expensive—as much as 50%—than an occurrence policy. But, to ensure continued coverage for your services during the policy period after a claims-made policy expires, it’s wise to purchase tail coverage. Consider which option will be the better value for you in the long-term before making a decision regarding which type of policy to purchase. The additional up-front cost of premiums for an Occurrence Policy, year-after-year, may end up costing you more than a Claims Made Policy even with the cost of the tail coverage added on.
Coverage
If a claim is filed against you for an incident that happened five years ago, and you had an Occurrence Policy at that time, you will be covered by the policy limits that were in force five years ago. Unfortunately, those limits may not adequately protect you from today’s cost of defending a claim. On the other hand, if you maintain an uninterrupted Claims Made Policy, claims will be paid with the current limits you have in force at the time the claim is made and reported. A Claims Made Policy may provide better coverage long-term.
Policies available from Lockton Fitness are Claims Made and reported policies. As a fitness professional, there is an overall lower risk of claims occurring long after your interaction with your client, and therefore, Claims Made coverage is adequate in most cases.
