CDPH Lead Inspector/Assessor California State Practice Exam

What is a common feature of claims made insurance?

1. More coverage options available

2. Less expensive compared to occurrence-based insurance

3. Covers damages after policy lapses

4. Requires prior claims history validation

The correct answer is: Less expensive compared to occurrence-based insurance

The correct choice highlights a common feature of claims-made insurance, which typically results in being less expensive compared to occurrence-based insurance. This cost difference arises because claims-made insurance only provides coverage for claims that are made during the policy period. Thus, the risk for the insurer is somewhat contained, often leading to lower premiums for the insured. In contrast, occurrence-based insurance covers claims for incidents that occur during the policy period, regardless of when the claim is filed. This broader coverage inherently involves a greater risk for the insurer, which is reflected in higher premiums. Understanding this difference in cost structure is crucial for making informed decisions when selecting insurance policies, particularly in industries with potential liabilities, such as healthcare or construction. Moreover, the other features listed in the options relate more to specific provisions and operational aspects of different types of insurance rather than directly to the cost structure of claims-made insurance.