What is the primary distinction between "occurrence" and "claims-made" policies?

The distinction between occurrence and claims-made policies is crucial in understanding how insurance coverage is provided. Occurrence policies cover incidents or events that happen during the policy period, regardless of when the claim is actually filed. This means that if an event occurs while the policy is active, it will be covered even if the claim is made years later, as long as the event happened during the time the policy was in force.

In contrast, claims-made policies work differently. They only provide coverage for claims that are made while the policy is active, regardless of when the incident that led to the claim occurred. This means if an incident happens but the claim is filed after the policy period, it won't be covered unless the policy is still in effect at the time the claim is made.

This key difference explains why the correct answer highlights that occurrence policies are based on the timing of the incident itself, while claims-made policies focus on when the claim is made, thus establishing the fundamental difference between the two types of coverage.