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Tail coverage
Tail coverage is an addition to a claims-made policy. It extends coverage for incidents that happened during the time you had your policy, but a claim was not filed until after your policy expired or was canceled. Tail coverage is another name for an extended reporting period.
What is tail coverage?
Tail coverage is an endorsement (or an addition) to your insurance that allows you to file a claim against your policy after it expired or was canceled. It applies to claims-made insurance policies and typically involves paying your insurer an additional fee.
Tail coverage is also known as extended reporting period (ERP).
You’ll find tail coverage in claims-made policies, such as professional liability insurance (also called errors and omissions insurance or malpractice insurance) and directors and officers insurance (D&O).
Tail coverage does not apply to occurrence-based policies. You don’t need tail protection for occurrence-based policies because coverage is available as long as the insurable event occurred during the policy period, even if you canceled your policy later.
Tail coverage is different from nose coverage. Nose coverage provides protection back to the first date of continuously maintained insurance coverage (typically with professional liability or E&O insurance). This means your current claims-made policy will even pay for incidents that happened under another policy as long as you kept your insurance active. The first date of coverage is also known as a retroactive date.
View video transcript.
As a small business owner, you know it’s important to understand how your insurance policy works.
A claims-made policy provides benefits only if you file a claim after the policy start date. If you cancel your policy and then report a claim, it will not be covered.
In this case, if you had a $1 million claims-made policy and are sued for $1 million in your first year, you’d no longer have coverage. That is, unless you increase your policy limit in the second year.
Occurrence-based and claims-made policies are often found in specific types of insurance coverage.
For example, claims-made policies will often be found in your directors and officers coverage and your professional liability insurance, which is also referred to as errors and omissions insurance.
If you’re just starting out, you may want a lower cost claims-made policy.
Get the right coverage for your small business with Insureon today. Click the link to get started.
What are the benefits of tail coverage?
Tail coverage protects your business in times of transition. It enhances both your financial security and peace of mind, allowing you to focus more on running your business. For instance:
When you retire from your business, tail coverage makes sure you continue to have liability protection even though you canceled your claims-made insurance policy.
When you switch to a new occurrence-based policy, tail coverage protects your prior acts (work you did while you were insured elsewhere). Without it, you’d only have coverage for incidents that occur when your new policy is active.
Some companies impose a narrow time window for buying tail protection after cancellation.
How much does tail coverage cost?
Insurers typically charge a fixed percentage of your professional liability insurance policy cost, often between 100 percent and 300 percent of your final premium.
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How do you get tail coverage?
Contact your Insureon agent to add tail coverage to your insurance policy. It’s a good idea to do this before canceling your policy because some companies impose a narrow time window for buying tail protection after cancellation.
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Updated: October 17, 2024
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