A discovery period is an additional period after policy or bond termination during which covered losses from earlier acts may still be discovered and reported. In plain language, it is extra time after the contract ends for hidden losses to surface, as long as the policy or bond allows that type of reporting.
Why discovery periods exist
Some losses are not visible during the policy term itself. Crime, fidelity, and similar losses may remain concealed until after the contract expires or is canceled. A discovery period helps protect the insured from losing coverage solely because the loss was uncovered too late, provided the underlying act falls within the contract’s rules.
What it does and does not do
A discovery period does not create coverage for brand-new wrongful acts after expiration. Instead, it usually preserves reporting rights for losses arising from acts that took place while the contract was in force or otherwise within the covered time frame.
That means the main questions are often:
- did the underlying act occur within the covered period
- was the loss discovered within the allowed discovery period
- was notice given correctly
Practical example
Suppose a fidelity bond expires on December 31, but employee theft that occurred during the bond term is not discovered until three months later. If the bond provides a discovery period and the insured reports within that period, the claim may still be considered even though the contract itself has already ended.
Related Terms
- Discovery Cover
- Claim
- Forgery or Alteration Coverage Form
- Dishonesty, Disappearance, and Destruction Policy
- Notice of Loss
- Expected Claims