Professional liability, cyber and directors' policies are almost always written on a claims-made basis rather than an occurrence one. The reason is that the losses they cover surface years after the work.
Occurrence and claims-made trigger differently
An occurrence policy responds to events happening during its period, whenever the claim eventually arrives, even decades afterwards.
A claims-made policy responds to claims first made and reported during its period, regardless of when the underlying work was performed.
The trigger is the claim rather than the act, and that changes which policy year has to answer.
Both forms can cover the same loss. They differ only on which contract pays for it.
Long-tail losses make occurrence cover hard to price
Professional errors are often discovered years after the advice was given, when a transaction unwinds or an audit takes place.
An occurrence insurer would have to reserve for unknown claims arising from work done long ago, priced against legal costs it cannot foresee.
Claims-made cover removes that uncertainty by fixing the insurer's exposure to claims reported inside a known window.
It also lets each year's price reflect current legal costs rather than an estimate of what litigation might cost a decade from now.
Retroactive dates define how far back cover reaches
A claims-made policy carries a retroactive date, and work performed before it is excluded even where the claim is reported during the period.
Maintaining that date through renewals and changes of insurer preserves cover for past work, and losing it creates a permanent gap.
A new policy issued with a current retroactive date covers nothing that has already been done.
This is the single most consequential term to check when switching insurers in these lines.
Continuity depends on unbroken renewal
Because cover attaches at reporting, a lapse means claims arising from past work have no policy to be reported into.
Extended reporting periods, usually called tail cover, are purchased when a policy ends and allow reporting for a stated further period.
Tail cover is bought once, priced as a multiple of the expiring premium, and it does not renew afterwards.
Retirement and sale of a practice need planning
A professional who stops practising still faces claims from earlier work, and the policy that would have covered them ends with the practice.
Run-off cover addresses that, and the option to buy it usually has to be exercised within a short window after expiry.
Because the exposure outlives the business, the decision belongs before the final policy ends rather than after it.