What does 'Claims Made' mean?
Claims Made is a term used to describe an insurance policy which only provides cover for claims which are notified during the term of the policy. This is not necessarily the same time period when the actual incident or error causing the claim occurred.
You therefore need to be insured both at the time the incident occurred and also when your client makes their claim against you. 'Claims made' works this way because professional errors can be discovered many months or even years after the mistake was made.
As an example: If you made a costly mistake for a client in 2020 but your client does not discover their loss until 2022, it is your 2022 policy that deals with the ensuing negligence claim against you. Therefore, a valid professional indemnity policy or 'run-off' policy must remain in force at all times for a claim to be met by an insurer.
Please also bear in mind that if you change your limit of indemnity, it is the limit purchased when the claim is notified that applies, not the limit purchased when the work was actually carried out.
For more information on this subject or to talk to one of our experts, please call 0345 251 4000.