What does "claims-made" coverage in liability insurance signify?

"Claims-made" coverage in liability insurance signifies that coverage is active only if the claim is filed during the policy period, regardless of when the incident occurred that led to the claim. This type of insurance is particularly important in fields where claims may arise long after the work has been completed, such as medical or professional services.

The correct answer correctly indicates that claims-made policies are designed to respond only to incidents occurring within the specific duration of the policy. This means that if an incident occurs after the policy has expired, even if the claim arises during the subsequent claim-filing period, it would not be covered.

The other choices misrepresent the nature of claims-made coverage. The option indicating that coverage is effective as long as the policy is maintained simplifies the concept too much, failing to consider the specific timing of claims. The choice stating that coverage is triggered by incidents occurring during the policy period ignores the claim filing requirement and implies a broader coverage scope than exists with claims-made policies. Lastly, the option about automatic adjustments with claims frequency does not relate to the core principle of claims-made coverage, which focuses on the timing of claims rather than the frequency of incidents.

Thus, understanding that claims-made coverage ties the protection strictly to claims made during the policy period is