If you work in a licensed profession where your decisions or actions could lead to allegations of negligence, having your own professional liability insurance is critical—even if your employer provides coverage. Employer-sponsored policies are primarily designed to protect the organization, not you individually, and may not include coverage for defending your professional license before a regulatory or licensing board.
Your professional license is often the foundation of your career. Even if a claim ultimately has no merit, responding to complaints, investigations, or disciplinary actions can be time-consuming and expensive. Carrying your own policy ensures that you have coverage specifically focused on protecting your personal interests and professional standing.
Once you decide to purchase professional liability insurance, one of the most important decisions you’ll face is choosing between a claims-made policy, an occurrence policy, or adding tail coverage.
Understanding the differences between claims-made, occurrence, and tail policies
Before selecting a policy, it’s important to understand how each type of coverage works.
Claims-Made Policy
A claims-made policy provides coverage for incidents that occur and are reported while the policy is active. In other words, both the event and the claim must happen during the policy period for coverage to apply.
Claims-made policies are often less expensive initially than occurrence policies. However, coverage ends when the policy ends. If an incident occurred during the policy period but a claim is filed after the policy has terminated, the claim would not be covered unless additional coverage is in place.
Example:
If you carry a claims-made policy from 2012–2015 and an incident occurs during that time, you are covered only if the claim is filed before the policy ends. A claim filed after 2015 would not be covered without tail coverage.
Occurrence Policy
An occurrence policy covers incidents that happen during the policy period regardless of when the claim is filed. As long as the event occurred while the policy was active, coverage applies—even if the claim arises years later.
Example:
If you have an occurrence policy from 2012–2015 and an incident occurs during those years, the policy will still respond even if the claim is filed after 2015.
This structure provides long-term peace of mind and eliminates the need for additional coverage once the policy period ends.
Tail Policy (Extended Reporting Endorsement)
Tail coverage extends the time you can report claims under a claims-made policy after it ends. This is especially important if you retire, change careers, or switch insurers and no longer maintain a claims-made policy.
Statutes of limitations vary by claim type and jurisdiction. While many professional negligence claims must be filed within a few years, some claims—such as those involving minors—may not surface until much later. Without tail coverage, you could be personally responsible for defense costs and damages related to past work.
Tail coverage can be costly and may approach the price of an annual policy, which is why some professionals prefer an occurrence policy from the outset.
6 questions to ask when choosing between claims-made and occurrence coverage
Taking time to understand your coverage before purchasing can prevent unexpected costs and stress later. Here are six key questions to ask any insurance provider:
1. What does the insurance cover?
Confirm that the policy includes both professional liability and license defense coverage. Some policies may only address civil liability claims and exclude administrative or regulatory proceedings. If claims-made coverage is offered, ask about the cost and availability of tail coverage.
Some policies also reimburse lost income for time spent attending hearings, depositions, or proceedings—this can be an important benefit.
2. What are the coverage limits?
Coverage limits typically include:
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Per-claim limit (the maximum paid for a single claim)
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Aggregate limit (the total amount paid during the policy year)
Higher limits generally mean higher premiums. The appropriate amount depends on your role, responsibilities, and risk exposure, so it’s important to discuss this with your insurance provider.
3. Are there association or group discounts available?
Professional associations sometimes partner with insurance providers to offer discounted rates or enhanced coverage. If you belong to any professional organizations, ask whether this option is available.
4. What are your obligations under the policy?
Policyholders are typically required to promptly report incidents, cooperate with investigations, and participate in legal proceedings if necessary. Failing to meet these obligations could jeopardize coverage.
5. What is the insurer’s duty to you?
Your insurer should have a clear duty to defend covered claims and keep you informed throughout the process. Reviewing policy language with an agent can help ensure you understand how defense and communication are handled.
6. What is not covered?
Most professional liability policies exclude criminal acts, intentional wrongdoing, and certain non-professional activities. Understanding exclusions upfront helps avoid surprises later.
Whether you choose a claims-made or occurrence policy, the most important factor is ensuring you’re protected for incidents that arise from your professional practice. Being named in a claim or facing a licensing complaint can be overwhelming—but having the right insurance coverage means you won’t have to face it alone or pay out of pocket for your defense.
This article is intended for educational purposes only and does not constitute legal advice. Readers should consult qualified legal or insurance professionals regarding their specific circumstances.
