The process of shopping for professional liability insurance can be confusing, even for an attorney. There is a lot of information and insurance jargon to muddle through. Here’s a handy glossary to use when shopping for insurance or examining the terms of your current policy. 

Claims-Made Policy

A policy that only covers claims made during the period in which the policy is in effect. Claims that are made before the policy started or after it ended are not covered—even if the act that gave rise to them occurred within the policy period.

Coverage

The amount of money the insurer will pay out. The level of coverage is affected by not only by the policy limit but also the terms and amount of the deductible.

Deductible

The amount of money the insured will pay out of pocket in the event of a claim. Lower deductibles are associated with higher premiums. 

• A per-claim deductible is paid out of pocket for each individual claim.
• An aggregate deductible places a limit on total out-of-pocket costs regardless of the number of claims made.

Exclusions

Specific situations that are not covered by a policy. The policy contract will specify what is not covered; it is important to understand these exclusions before securing a policy.

Extended Reporting Period

Also known as tail coverage, this additional coverage offers protection after the policy’s end date.

Lapse

A gap in legal malpractice insurance coverage caused when the policyholder fails to meet their obligations under the insurance contract.

Occurrence Policy

A policy that covers any claims that occurred during the time the policy was in effect. As long as the claim is regarding an incident that occurred during the policy period it will be covered, even if the policy has expired.

Policy Limit

The maximum amount that the policy will pay out. Premiums are higher for higher policy limits. When assessing policy limits, consider whether defense costs are included in the liability limit, which reduces the amount available to cover settlement or judgment costs.

Premium

The cost of an insurance policy.

Prior Acts Coverage

Coverage for for claims made prior to the start of the policy date when another insurance policy was in effect.

Retroactive Date

Usually the very first day of E&O insurance coverage. As long as coverage is maintained continuously with no lapses, the retroactive date of prior acts coverage will not change.

Understanding the most common insurance terms will help you make wise decisions about what type of policy is best for you. Make sure that your E&O insurance both fits in to your budget and provides sufficient protection for your practice. If you are still unsure about any terminology or have concerns about your policy, the professionals at ProDefender are available to help. Call us at (866) 434-8557 or email us at info@prodefender.com.