What characterizes a "claims-made policy"?

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 as long as the claim is made while the policy is active, it will be covered, even if the actual event happened prior to the start of the policy.

This approach differs from occurrence policies, which cover claims based on the date of the incident itself, meaning that the event must occur during the policy period for the claim to be valid. Therefore, the defining feature of a claims-made policy is its provision of coverage linked to the reporting of claims, making it essential for policyholders to understand the timing of their claims relative to their coverage. This characteristic is critical for professionals in fields like insurance or those who deal with liabilities, as it can significantly affect risk management and claims handling strategies.

The other options do not accurately reflect the nature of claims-made policies. They either describe aspects of other coverage types or imply scenarios outside the specific mechanics of a claims-made structure.