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Claims-Made Policies: What you need to know before coverage expires

A claims-made policy must be in force at the time a claim is reported to the insured no matter when the service/act took place. If the insured no longer needs an active policy, they may be able to purchase an Extended Reporting Period (ERP) option. The ERP will give them additional time to report claims that occurred prior to closing or selling their business.

INFORMATION TO CONSIDER (check the policy, wordings are  not standard or uniform)

1. Most policies have a provision that prohibits the purchase of an ERP when a policy has canceled for non-payment of premium.

2. The policy will restrict how long the insured has to purchase the ERP. For instance, a policy may require a written request to be received within 30 days of policy expiration.

3. The premium for an extended reporting period is fully earned and cannot be changed once the ERP has been accepted and paid for.

If the insured decides to purchase an ERP, most carriers will require a written request on the insured's letterhead along with payment in full.