Understanding Professional Liability Insurance: Claims Made vs. Occurrence Policies

As a fitness professional, you’re skilled in giving instructions and doing what you can to match a As a fitness professional, you’re skilled in giving instructions and doing what you can to match a customized fitness program with the needs of the trainee. In most cases, your training gets results, goals are reached and the success stories stack up.

But what if a claim is filed? Will the claim be covered? What if it’s years after the incident?

When looking to buy Professional Liability insurance, one of the most important things to understand about the policy is how coverage will respond when a claim is filed and how long coverage will protect you from claims.

In the case of Professional Liability insurance, there are two options:

1. Claims made
2. Occurrence

As a fitness professional, it’s important to know which types of coverage are available so you can make the best choice for your livelihood and your practice. Read on to learn the difference between claims made and occurrence policies and why this coverage distinction is so important.

Understanding Claims Made Policies for Fitness Professionals

In its simplest definition, claims made or occurrence coverage determines how long your professional liability coverage will protect you from claims.

Claims Made Policies

Claims made policies require a claim to be made against the insured and reported to the insurer during the policy period, or effective dates.

Claims made policies may also have an extended reporting period or a “tail,” which specifies an extended period after the cancellation of the policy when a claim can still be reported. This tail coverage is typically purchased when a claims made policy is cancelled and will not be replaced by another claims made policy because the business is no longer in operation or has procured an occurrence policy form.

To have your claim considered under a claims made policy, the claim must meet two criteria:

• The loss must have occurred during the active policy period.
• The claim must be filed and reported to your insurer either during the active policy period (before a policy’s cancellation), or within any tail coverage period specified by your policy.

Another aspect of a claims made policy to be mindful of is what happens when you switch insurance providers. Prior to buying a new Professional Liability insurance policy from a different insurance carrier, you may consider:

1. Purchasing tail coverage from the insurance company of the first policy.
2. Purchasing prior acts coverage from the insurance carrier of the new insurance policy. Prior acts coverage will provide coverage for your professional services, dated back to the assigned retroactive date. It’s a safeguard allowing you to continue this important coverage uninterrupted and will help ensure you are covered for your past professional services.

Understanding Occurrence Policies for Fitness Professionals

Occurrence policies

Occurrence policies are a little different, in that they protect the policy holder from a covered incident even if the claim is made after the policy is no longer active. This allows for a bigger window to report claims.

If the loss or incident occurred during the active policy period, policy coverage would apply. It doesn’t matter whether a claim was reported during the policy effective dates or later.

This can be a useful feature in some cases, where there could be a significant lag between when an incident occurs and when a claim is presented. Because of the length of time a claim can be filed with an occurrence policy, this coverage is typically more expensive than a claims made policy.

Additional Considerations for Fitness Professionals

The following considerations may be helpful in deciding which type of policy is best for you.

Cost

The annual premium for a claims made policy is typically much less expensive—as much as 50%—than an occurrence policy. But to ensure continued coverage for your services during the policy period after a claims made policy expires, it’s wise to purchase tail coverage.

Consider which option will be the better value for you in the long run before deciding. The additional up-front cost of premiums for an occurrence policy, year-after-year, may end up costing you more than a claims made policy even with the cost of the tail coverage added on.

Coverage

If a claim is filed against you for an incident that happened five years ago, and you had an occurrence policy at that time, you will be covered by the policy limits that were in force five years ago. Unfortunately, those limits may not adequately protect you from today’s cost of defending a claim.

On the other hand, if you maintain an uninterrupted claims made policy, claims will be paid with the current limits you have at the time the claim is made and reported.

IDEA has partnered with Lockton Affinity to provide access to comprehensive liability insurance coverage for small business owners and fitness professionals at an affordable price.

Policies available from Lockton Affinity are claims made policies. As a fitness professional, there is an overall lower risk of claims occurring long after your interaction with your client, and therefore, claims made coverage is adequate in most cases.

Explore additional coverage details and get started today!

The IDEA Health & Fitness Association Insurance program is administered by Lockton Affinity, LLC d/b/a Lockton Affinity Insurance Brokers LLC in California #0795478. Coverage is subject to actual policy terms and conditions. Policy benefits are the sole responsibility of the issuing insurance company. IDEA Health & Fitness Association will receive a royalty fee for the licensing of its name and trademarks as part of the insurance program offered to the extent permitted by applicable law.