What does a 'claims-made' policy mean?

A 'claims-made' policy is specifically designed to provide coverage for claims that are reported during the policy period, regardless of when the incident that led to the claim occurred. This means that the timing of when the claim is reported is crucial; it must be within the policy's active coverage period for the insurance company to accept it.

This type of coverage is particularly relevant in liability insurance, where incidents may occur well before a claim is filed. Often, claims may arise long after the event has taken place, making it vital for the policyholder to report these claims while the policy is still in effect.

Understanding this distinction is important because it outlines the responsibility of the insured party to both have an active policy and to report any claims promptly. The other options provide information that does not accurately reflect the nature of a 'claims-made' policy, such as restrictive conditions on the types of coverage or renewal provisions.