Which type of insurance is described as the 'bad' option for diseases with long latency because it may not pay if the policy isn't in force?

• A. Occurrence Made
• B. Claims Made
• C. General Liability
• D. Professional Liability

Answer: (B)

When a claim needs to be paid depending on when it’s made, not just when the event happened, you’re looking at a claims-made policy. Long-latency diseases are tricky because exposure and diagnosis can be years apart. A claims-made policy pays only for claims that are made during the policy period (and reported within that period or via tail coverage). If there’s any gap in coverage, or if the claim is made after the policy has expired, there may be no payment at all. That makes this type of coverage risky for diseases that don’t reveal themselves until long after exposure.

In contrast, an occurrence-based policy pays for any incident that occurred during the policy period, regardless of when the claim is filed. So even a late-diagnosed condition tied to an exposure during the policy term would be covered, which is why occurrence is preferred for long-latency illnesses. General liability and professional liability describe broad areas of protection, but the timing distinction that creates the risk here is specific to claims-made coverage.

So the described “bad” option, because it may not pay if the policy isn’t in force when the claim is made, is the claims-made type.