Final answer:
The correct type of insurance coverage basis for BI or PD that occurs during the policy period and is covered irrespective of when the claim is made is called Occurrence Basis. This contrasts with Claims-Made Basis, which covers claims filed during the policy period regardless of when the event occurred. Occurrence Basis is significant for scenarios with potential long-term effects, such as latent injuries or environmental damages. Option 1: Claims-Made Basis
Step-by-step explanation:
The subject of this question pertains to the type of insurance coverage basis that applies to bodily injury (BI) or property damage (PD) occurring during the policy period, irrespective of when the claim is actually made. The correct option is Occurrence Basis, meaning that the insurance policy will cover events that happen during the term of the policy. This is distinct from a Claims-Made Basis where the policy covers claims made during the policy period, regardless of when the event causing the claim happened.
An Occurrence Basis policy provides a safety net for events that may have long-tail effects, like environmental hazards or latent injuries, as it does not limit coverage to claims made during the policy period. This is particularly useful in scenarios where medical expenses are incurred, or when there is a need due to the policyholder's demise, car damages, theft, or damages to others, and when a dwelling is damaged or burglarized.
In contrast, the other mentioned bases, such as Retroactive Basis and Aggregate Basis, are related but distinct concepts in insurance. A Retroactive Basis allows for coverage of claims made during the policy period for events that occurred before the policy inception, up to a certain agreed-upon date. The Aggregate Basis refers to the maximum limit that the insurer will pay for all claims within a specified period.