Whether you manage, operate, or support a senior living community, understanding your insurance can feel tricky—especially when it comes to claims-made coverage. We’ve put together this simple FAQ to help you understand the basics and why it matters for your communities.
1. What is claims-made insurance?
Claims-made insurance covers claims that you are both made aware of and report to your carrier while your policy is active.
2. How is claims-made different from occurrence-based coverage?
An occurrence policy covers events which occur during the policy period regardless of when they are reported—even if the claim is filed years later. Claims-made policies cover events reported during the policy period (or an extended reporting period). Claims-made is common for professional services like senior living, while occurrence coverage is typical for lines like auto or property insurance.
3. What’s a retroactive date, and why does it matter?
The retroactive date is the earliest date an incident can happen and still be covered. Claims from before this date aren’t covered. Keeping this date consistent is key to avoiding coverage gaps.
4. What if I switch insurance carriers?
Make sure your new policy’s retroactive date matches the old policy’s. Otherwise, claims from earlier incidents might not be covered. You can also buy “tail coverage” (extended reporting period) from your old insurer to cover claims after switching.
5. What is an extended reporting period (ERP) or tail coverage?
Tail coverage lets you report claims after your policy ends, as long as the incident happened while the policy was active. This is important if you change insurers, sell your business, or close a facility.
6. How long does tail coverage last?
It varies—common options are 1, 3, or 5 years, and some insurers offer unlimited tail coverage. Costs and length depend on your insurer and policy terms.
7. What are step factors?
Step factors are premium multipliers in the first few years of a claims-made policy. Early on, the insurer’s risk is limited, but it grows in subsequent renewal years. In other words, for your first policy year your carrier is only insuring 12 months of operations; in the second policy year, they are insuring 24 months, and so on. After about five years, these factors usually level out.
8. Can I be covered for incidents that arise after I retire or close my facility?
Yes! By purchasing tail coverage, you can report claims after your policy ends, as long as the incidents happened during the covered period.
9. Why is claims-made coverage important for senior living operators?
You face risks like negligence claims, regulatory issues, or errors in resident care. Claims can come months or years after an incident, so having claims-made coverage with the right retroactive date and tail coverage is crucial.
10. How do I avoid gaps in my professional liability coverage?
Keep your coverage continuous, make sure retroactive dates stay consistent when switching policies, and buy tail coverage if needed.
11. Should I work with a broker to manage my claims-made coverage?
Absolutely. An insurance broker who knows the senior living industry can help customize your coverage, explain tricky terms, and assist with tail coverage or retroactive dates.
If you have more questions or want help reviewing your coverage, feel free to reach out to your Marsh McLennan Agency representative. Staying protected means peace of mind for you and your residents.
