Occurrence vs Claims-Made: What Roofing Contractors Need to Know
When you purchase general liability or professional liability insurance for your roofing business, one of the most important decisions you will face is choosing between an occurrence policy and a claims-made policy. This choice affects how long your coverage lasts, what you pay, and whether you are protected years after a job is complete. For roofers, where callbacks and latent defects can surface long after the shingles are nailed down, this distinction is critical.
How Occurrence Policies Work for Roofers
An occurrence policy covers any incident that happens during the policy period, no matter when the claim is filed. Suppose you install a commercial TPO roof in March 2024 and your policy runs from January to December 2024. If the building owner discovers a leak in 2027 and files a claim, your 2024 occurrence policy responds, even though you may have switched carriers or retired in the meantime.
This is a powerful benefit for roofing contractors because roof failures often do not manifest immediately. Water intrusion from improper flashing, underlayment defects, or ventilation issues can take months or years to become apparent. With an occurrence policy, you do not need to worry about maintaining continuous coverage with the same carrier to be protected.
The trade-off is cost. Occurrence policies for roofers typically run 20% to 40% more than a comparable claims-made policy because the insurer assumes a longer tail of potential claims. For a mid-size roofing company doing $750,000 in annual revenue, that might mean paying $5,500 per year instead of $3,800.
How Claims-Made Policies Work for Roofers
A claims-made policy only covers claims that are filed during the active policy period for incidents that occurred after your retroactive date. The retroactive date is usually the date your first claims-made policy went into effect. If you cancel the policy or switch to a different carrier without purchasing tail coverage, you lose protection for all prior work.
Claims-made premiums start low and increase each year for the first five to seven years as the policy "matures." In year one, you might pay $1,800; by year five, you could be paying $4,200. The insurer prices this way because your exposure to prior acts grows each year the policy is in force.
The real danger for roofers comes when you need to cancel a claims-made policy. Tail coverage, also called an extended reporting period (ERP), typically costs 150% to 250% of your final annual premium. If your last premium was $4,500, you could pay $6,750 to $11,250 for tail coverage. Without it, you have zero protection for any work performed during the entire claims-made period.
Which Trigger Type Do GCs and Property Owners Require?
Most general contractors and commercial property owners require their roofing subcontractors to carry occurrence-based coverage. This is because the GC wants to know that if a roofing defect surfaces three years after project completion, the roofer's insurance will still respond without any question about policy status or tail coverage.
If you primarily do residential re-roofing and work directly with homeowners, you may have more flexibility. However, if you plan to bid on commercial projects or work as a sub for a GC, an occurrence policy is almost always required in the subcontractor agreement.
Real-World Scenario: The Importance of Trigger Type
Consider this scenario: You install a new architectural shingle roof on a $450,000 home. Two years later, the homeowner discovers extensive water damage in the attic caused by improper step flashing at a chimney. The repair claim totals $28,000. With an occurrence policy from the year of installation, you are covered. With a claims-made policy that you canceled or switched without tail coverage, you have no coverage and face that $28,000 out of pocket, plus potential legal fees.
Cost Comparison Over Time
While claims-made policies cost less initially, the total cost over a 10-year period often evens out or even favors occurrence coverage when you factor in tail costs. A roofing contractor paying $5,000 per year for occurrence coverage spends $50,000 over a decade. A claims-made policy starting at $2,000 and maturing to $5,000 might total $35,000 in premiums but require a $10,000 tail purchase, bringing the total to $45,000 with less flexibility and more risk of coverage gaps.
Making the Right Choice for Your Roofing Business
For most established roofing contractors, occurrence coverage is the better choice. It is simpler, more widely accepted, and eliminates the tail coverage risk. If you are just starting out and cash flow is tight, a claims-made policy can work as a stepping stone, but plan to convert to occurrence within two to three years as your business stabilizes. Whichever you choose, never let a claims-made policy lapse without purchasing tail coverage. The few thousand dollars you save today could cost you tens of thousands in uninsured claims down the road.