What is a claims-made policy?

A claims-made policy is specifically designed to cover claims made during its active period. This means that if a claim arises after the policy has been purchased but is made while the policy is still in effect, it will be covered. The critical aspect of this type of policy is the timing of when the claim is reported, rather than when the incident occurred. Therefore, if an incident occurs while the policy is active, but the claim is made after the policy has lapsed or been canceled, coverage will not be provided. This feature is important for professionals, such as asbestos investigators, who may face claims related to their past work, as it emphasizes the importance of maintaining active coverage to ensure protection against liability.

The other options do not accurately represent the characteristics of a claims-made policy. A claims-made policy does not cover past incidents unless they fall within the active period; it does not provide unlimited coverage, as policies typically have limits; and it is not related to a type of bond used for construction, which serves a different purpose altogether.