How does an occurrence coverage policy function?

An occurrence coverage policy is designed to provide protection for claims arising from incidents or events that occur during the policy period, regardless of when the claim is actually reported. This means that even if the policy has expired, a claim stemming from a covered incident that occurred while the policy was active can still be filed and will typically be processed and covered.

This type of coverage is specifically beneficial because it accommodates situations where the effects of an incident may not be immediately apparent or when legal action takes time to initiate. Once an event occurs during the active policy period, the coverage remains effective for that incident even after the policy has lapsed.

In contrast, coverage that focuses solely on incidents occurring during the current policy period limits the protection to claims reported while the policy is in effect, which can lead to gaps in coverage if the policy is no longer active when a claim arises. Hence, the mechanics of an occurrence coverage policy provide lasting protection beyond the duration of the coverage.