What is loss sustained coverage?

Loss sustained coverage is designed to protect policyholders from financial losses that occur during a specified time frame. Specifically, it covers losses that take place during the policy period, provided those losses are discovered within a set time frame following the policy's expiration, typically one year. This is particularly beneficial for businesses or individuals who may not immediately realize they've suffered a loss, ensuring they still have a path to compensation even after the active policy period has concluded.

The option suggesting coverage for loss discovered during the policy period but extended for the following year focuses on the timing of discovery rather than the occurrence of the loss itself, which is a key aspect of loss sustained coverage. Additionally, coverage for losses that occur after the policy ends and only during inspection is outside the typical scope of loss sustained coverage, which emphasizes the connection between the timing of the loss occurrence and its discovery. Thus, the correct answer aligns precisely with the definition and purpose of loss sustained coverage.