What is a key feature of a "claims-made policy" that distinguishes it from other types of policies?

A claims-made policy is distinctive primarily because it provides coverage for incidents that are reported during the active period of that specific policy. This means that if an incident occurs before the policy was in force but is reported during the time the policy is active, it may not be covered unless there is a retroactive date specified in the policy. The focus of a claims-made policy is on the timing of when the claim is made rather than when the incident occurred, which is a crucial element of its operation.

This feature is particularly important for professionals in industries like healthcare and legal services, where claims can arise long after an incident has taken place. Insured parties must be aware that they need to report claims while the policy is in effect to maintain coverage, making knowledge of the policy's duration critical for effective risk management.

Other types of policies, such as occurrence policies, cover incidents that occur during the policy period regardless of when the claim is reported. Thus, understanding the specific timing requirements of a claims-made policy helps policyholders manage their legal and financial risks effectively.