Claims-Made Policy
A type of liability insurance policy that covers claims only if they are first made against the insured during the policy period or a designated extended reporting period
Detailed Explanation
This means the policy must be in effect both when the incident occurred and when the claim is reported.
Practical Example
An accounting firm has a claims-made professional liability policy. If a client sues them for an error that happened last year, but the claim is made this year while the policy is active, it would likely be covered. However, if the policy had lapsed before the claim was made, it might not be covered.
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