Occurrence

Reviewed by Stefan Tirschler

Noun

oc·cur·rence | əˈkɝrəns

Definition: An event that could lead to an insurance claim.

The policy limit is $100,000 per occurrence.

What is an occurrence?

An occurrence is a single event that results in a single insurance claim.

In home insurance, common occurrences include break-ins, fires, burst pipes, or even a dog bite that leads to a liability claim. Each incident for which a homeowner could make an insurance claim is one occurrence.

Example

Stephen is terribly unlucky. One day, a windstorm causes widespread damage to the roof of his home. Later that same day, a faulty toaster oven starts a fire in Stephen’s kitchen. His home insurance policy covers both incidents, fortunately.

This is an extreme example, obviously, but it illustrates what an occurrence is in insurance. Both events happened on the same day, so Stephen will report both to his insurance company at the same time.

However, the windstorm and the fire have nothing to do with one another, so the insurance company will treat them as two separate occurrences. Stephen will end up filing two insurance claims, and his insurer will adjust each claim independent of the other. Stephen will probably have to pay a deductible for each claim, too. The claims process for these two occurrences is no different than if the losses had happened 6 months apart: they’re unrelated, so they’re two separate occurrences.

What does “per occurrence” mean in home insurance?

Occurrences matter when it comes to deductibles and coverage limits. Deductibles are the amount the home insurance customer pays in a claim before their insurer pays the rest. Deductibles apply per occurrence. So, in Stephen’s case from earlier, he will pay the deductible on each of his two insurance claims, because they are two separate occurrences.

Policy limits also apply per occurrence.

Example

Stephen’s misfortune continues: he owns three bicycles, each worth $2,000. His home insurance policy has a coverage limit of $5,000 for bicycles. That means if his bicycles are stolen or damaged, the most his insurance company will pay is $5,000 per occurrence.

One of Stephen’s bicycles is stolen in January. He makes a claim, and his insurer agrees to cover the loss of the $2,000 bicycle. The insurance company pays Stephen $1,500: the value of his bike minus his $500 deductible.

In February, another of Stephen’s bicycles gets damaged by a careless driver backing over it. Stephen makes another claim, which the insurer pays in the same way has the first. Stephen has now made a total of $4,000 of bicycle claims this year.

The next month, Stephen’s third bicycle gets destroyed in the aforementioned fire. As part of his fire claim, the insurance company agrees to reimburse Stephen for the third bicycle: another $2,000.

Now, Stephen has made a total of $6,000 worth of bicycle-related home insurance claims in one year.

Even though Stephen’s home insurance policy has a $5,000 coverage limit for bicycles, that limit only applies per occurrence. Since each of his three bicycles was lost or damaged in a different occurrence, his claims don’t reach the limit. Home insurance claims aren’t cumulative; after each claim, the policy limits and deductibles reset.

If all three of his bicycles were lost in the same occurrence, that would be $6,000 in one occurrence, so his settlement would be capped at the $5,000 policy limit.

Our examples so far have dealt with property damage, but occurrences come up in liability claims as well. They work much the same way.

When an event happens that leads to a liability claim (a dog bite, a slip-and-fall, accidentally setting fire to your neighbour’s house, et cetera), everything that results from that event is tied to the same occurrence.

That includes everything from legal fees to defend you in court, legal damages, reimbursement for lost wages while you’re attending court, and so forth. All of that is added up per occurrence, and your insurer will pay for such things up to the liability coverage limit on your policy.

As with property damage claims, liability coverage limits reset between claims (though hopefully you’re not embroiled in so many lawsuits that it’s an issue).

Some insurers won’t count certain expenses towards the liability limit, and some expenses may not be covered at all. Always check your policy wordings to see how you’re covered.

The important points

  • An occurrence is an event that leads to an insurance claim.
  • Coverage limits and deductibles apply separately to each occurrence.
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