What is discovery-based coverage?

Discovery-based coverage is a type of insurance provision that allows for claims to be made based on the discovery of a loss within a specified timeframe, typically during the policy period or shortly thereafter. The key aspect of this coverage is that it focuses on when the loss is first discovered rather than when it actually occurred. This means that if a loss is identified during the coverage period or within a designated period after it (such as 60 days), the insured can still file a claim for that loss.

This provision is particularly relevant in situations where losses may not be immediately apparent, such as in cases of latent damage or fraud, providing essential protection for policyholders. The focus on the discovery of the loss ensures that even if the event causing the loss occurred before the policy was active, as long as the loss is discovered within the appropriate time frame, coverage is provided.

The other options describe different types of insurance scenarios that do not correspond with the concept of discovery-based coverage. It is crucial in understanding insurance policies that the definitions and conditions clearly outline what is covered and under what circumstances, which is why the correct answer reflects the framework of discovery-based coverage accurately.