When you buy a policy and transfer risk to an insurance company in exchange for payment of a premium, the incidents, events, or circumstances covered by your policy are called triggers of coverage. The trigger of coverage depends on the type of policy you have.
Conditions of Coverage
People are often confused about the difference between when coverage is triggered and when conditions are met. Conditions of coverage include the steps that you take as a result of the trigger of coverage, such as notifying the insurance company that you have a claim (notice of claim) and submitting proof of your loss, which documents the type of claim you have and what the value of the claim is.
Types of Coverage
A trigger of coverage happens differently depending on what types of policies you have.
1. Occurrence-based policies: Most traditional liability policies are occurrence policies. This means that the triggering event, usually an accident or incident which causes physical injury or property damage, needs to occur during the period that the policy is in force, but you can notify the insurance company about the loss after the policy is no longer in force. For example, If somebody undermines your property and cracks your house’s foundation, you might not know about it until a year and a half later when a leak starts as a result of the crack. Even if you no longer have the same policy you had at the time the crack was made, that trigger of coverage will typically be covered under the old policy.
2. Claims made & reported policies: These are usually professional liability policies. Under a “claims made” policy, claims have to be made against you during the policy period to trigger coverage. If the claim against you is not made during the coverage period of the policy—from January to December of 2016, for example—the claim is not going to be covered. Thus, when the incident or alleged wrongdoing occurred does not matter if the claim is not made during the policy coverage period. Now, if you have a “claims made and reported” policy, not only does the claim have to be made during that time, but you also have to report the claim to the insurance company during the policy coverage period for it to be covered.
3. Long-term disability & long-term care policies: These policies are similar to occurrence-based policies. Long-term disability coverage begins when an event, such as an injury or sickness, occurs that prevents or limits you from performing your (or any) occupation.
In the long-term care sphere, the trigger event is an inability to do, or difficulty in doing, a certain number of activities of daily living (e.g., bathing, dressing, or taking care of bodily functions) on your own. Most long-term care policies will say that if you can’t do 2 or 3 of the activities of daily living, then you have triggered coverage under the policy. It can sometimes be difficult to identify the exact moment in time when you were unable to do something or are limited in doing something. Medical professionals, the insurer, and you will have to work together to determine the date that coverage was triggered.
As I always say, you have to look carefully at the provisions of your insurance policy to see exactly what type of coverage you have and which rules apply. Please contact us today if you have any questions about your insurance coverage.
Evan S. Schwartz
Founder of Schwartz, Conroy & Hack