Policy Term
What Is a Policy Term?
A policy term is the period of time your insurance policy is active. It includes the policy’s start date (effective or inception date) and end date (expiration date).
Coverage only applies within this window, based on how the policy is triggered. If a loss or claim falls outside the policy term, coverage may not apply — even if you were insured before or after.
Policy terms are usually written for one year, but the exact dates and times matter more than most people realize.
What Are the Key Dates in a Policy Term?
The two most important dates in a policy term are the effective date and expiration date. Depending on the type of policy and coverage you have, other dates may be mentioned.
| Term | What it Means | Example |
|---|---|---|
|
Policy term (policy period) |
The full window the policy is active |
01/01/2025 to 12/31/2025 |
|
Effective date |
The exact date and time coverage starts |
Policy effective 01/01/2025 at 12:01 a.m. |
|
Expiration date |
The exact date and time coverage ends |
Policy expires 12/31/2025 at 12:01 a.m. |
|
Retroactive date (claims-made) |
How far back incidents can occur and still be covered |
Retroactive date 01/01/2022 for professional liability |
|
Extended reporting period (tail) |
Extra time to report claims after the policy ends (for claims-made policies) |
1-year tail to report claims for incidents before 12/31/2025 |
Most policies begin and end at 12:01 a.m. local time at the insured’s address, unless otherwise stated.
Policy Term, Occurrence Policies, and Claims-Made Policies: What’s the Difference?
Policy terms work differently depending on the type of coverage you have: occurrence or claims-made.
- Occurrence policies: Coverage is based on when the incident happens. If the incident occurs during the policy term, that policy usually responds (even if the claim is made years later).
- Claims-made policies: Coverage is based on when the claim is made and reported. The policy must be active when the claim is made, and the incident must occur after the retroactive date.
Why Do Policy Terms Matter?
Policy terms matter because of timing. It’s all about when incidents happen and when they are reported. Details about your policy terms affect:
- Whether a claim is covered
- Which policy responds
- Whether a lapse breaks coverage for past work
- Whether tail coverage is needed
For claims-made policies, letting a policy expire without replacement or tail coverage can mean past work is suddenly uninsured.
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