Most of us tend to assume a claim is the point where we go to the insurance company for money to reimburse our loss. And, for something like your homeowner policy (such as a burst pipe flooding your basement), this is generally the case. However, this is NOT necessarily how your firm’s fidelity bond, professional liability, directors & officers liability or employment practices liability insurance coverage works.
Most policies demand you notify the carrier long before the final loss is known. In fact, usually you have to contact them as soon as you learn there’s a possibility of a loss (often referred to as “discovery”). So, for example, you would notify your carrier as soon as you “discover” an employee dishonesty loss or receive notice that you’re being sued, NOT when you’ve lost the case and have to a pay out the judgment against you.
In addition, your policy has a very specific time limit for reporting the claim—anywhere from 15 to 90 days depending on the coverage and carrier. Miss the window and the insurance company may decline the potential claim due to late reporting. That could be a huge out-of-pocket expense, so make sure you know how your policy defines a claim and how long you have to report it, both of which will vary from coverage to coverage and carrier to carrier.