Claims-Made Coverage: A Practical Guide for UK Businesses

If you’ve ever bought business insurance, you’ve probably seen the term “claims‑made coverage” tossed around. It can feel like insurance jargon, but the idea is simple: the policy only pays out if a claim is made while the policy is active. That’s different from an “occurrence” policy, which covers any claim that happens during the policy period, even if you report it later.

Understanding this difference matters because it affects your cash flow, the way you manage risk, and even how you file tax deductions for premiums. Let’s break it down without the legal mumbo‑jumbo.

How Claims‑Made Policies Work

A claims‑made policy kicks in when three things line up: you have a valid policy, the incident that caused the claim happened during the coverage period, and you actually lodge the claim while the policy is still in force. If any of those steps miss the mark, the insurer can say no.

Because of that, many professionals—like lawyers, accountants, and consultants—prefer claims‑made cover. Their work often leads to disputes that surface years after the original service. By buying a claims‑made policy and adding a “retroactive date,” you tell the insurer to cover incidents that happened before the policy start, as long as the claim is reported before the policy ends.

One catch is the “tail” coverage. When you decide to switch insurers or let a policy lapse, you can purchase a tail endorsement. It lets you report any past incidents for a set period, even though the original policy is gone. Tail coverage can be pricey, but it protects you from surprise lawsuits down the line.

Choosing the Right Coverage for Your Business

So, should you go claims‑made or stick with occurrence? Ask yourself three questions:

1. How long does a claim usually surface? If your clients can raise complaints years later, a claims‑made policy with a good retroactive date and tail option makes sense.

2. What’s your budget? Claims‑made premiums tend to be lower at the start because the insurer isn’t covering old incidents. However, factor in the cost of a tail later on.

3. How comfortable are you with paperwork? Claims‑made policies need diligent record‑keeping. You’ll have to track when policies start, when retroactive dates are set, and when you need tail coverage.

Another practical tip: check if your premiums are tax‑deductible. In the UK, business insurance is generally an allowable expense for corporation tax, so you can claim the cost against profits. Just keep the invoices and note which policy type you have—HMRC likes clarity.

Before you sign anything, compare a few quotes. Look for insurers that specialise in professional indemnity or public liability for your sector. Many UK brokers now offer online tools that show side‑by‑side comparisons of claims‑made versus occurrence options, making it easier to see the long‑term cost impact.

Finally, don’t ignore the fine print. Some policies exclude certain claim types or set lower limits for older incidents. Ask the broker to walk you through any exclusions and make sure the retroactive date covers the period you actually need.

Bottom line: claims‑made coverage can be a smart, cost‑effective way to protect your business—provided you understand the timing rules and plan for a tail if you ever switch policies. Keep your records tidy, know your retroactive date, and you’ll avoid unpleasant surprises when a claim finally lands on your desk.