Final answer:
The correct answer to the question is the occurrence policy, which covers incidents that happen during the policy period, even if the claim is made after the policy has lapsed. This is contrasted with a claims-made policy, which only covers claims made during the active policy period.
Step-by-step explanation:
In the context of insurance, the terms claims-made and occurrence are two different types of insurance policies. When an injury occurs during the policy period, but the claim can happen at any time after, the type of insurance that applies is the occurrence policy. An occurrence policy provides coverage for incidents that occur during the period in which the insurance policy is active, regardless of when the claim is actually made.
On the other hand, a claims-made policy covers claims only if the claim is made while the policy is active, irrespective of when the event causing the claim happened. In your scenario, since the injury occurs during the policy period and the claim can be made at a later date, it fits the description of an occurrence policy. Insurance works based on risk estimation and the coinsurance concept where the policyholder may pay a percentage of a loss while the insurance company pays the remaining cost.
Understanding these policies is crucial because insurance pays out when events like medical expenses are incurred, the policyholder dies, a car is damaged, stolen, or causes damage to others, or a dwelling is damaged or burglarized. Moreover, since insurance involves imperfect information, these policies are designed to manage the uncertainty of risk.