What is Tail Coverage (Insurance)?
The Short Answer
Tail Coverage (Insurance) explained simply
Tail Coverage, also known as an Extended Reporting Period (ERP), is an insurance policy that extends the period during which claims can be reported under a "claims-made" policy. A claims-made policy only covers claims that are both made and reported while the policy is active. If a claims-made policy expires, any claim reported after that date, even if the incident happened during the policy period, would not be covered without Tail Coverage. This type of coverage is especially important for professionals like doctors, lawyers, or consultants, where incidents might not be discovered or reported until long after the service was provided or the original policy ended. It acts as a safety net, ensuring that past work remains covered.
Real-World Example
The Doctor’s Retirement
Dr. Smith, a physician, decides to retire. For 20 years, she had a claims-made medical malpractice insurance policy. If she simply lets her policy expire, any patient who files a malpractice claim after her retirement, even if the incident occurred during her practice, would not be covered. To protect herself, Dr. Smith purchases Tail Coverage. This ensures that if a claim arises years later from an event that happened while she was practicing, her insurance will still respond and cover the costs.
Why this matters
Tail Coverage is critical for anyone with a claims-made insurance policy, especially when they are changing policies, retiring, or leaving a practice. Without it, you could be personally liable for claims that arise after your policy ends, even if the incident happened years ago. It provides peace of mind and protects your financial future from past professional liabilities.
Always review your insurance policies carefully, especially claims-made policies. Understand when and how claims are covered, and consider Tail Coverage if you are making any changes to your professional insurance.
Always review your insurance policies carefully, especially claims-made policies. Understand when and how claims are covered, and consider Tail Coverage if you are making any changes to your professional insurance.
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