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What is Tail Coverage and Why Do You Need It?

Tail coverage is a type of business coverage that is purchased in addition to a claims-made policy. It provides coverage for incidents that occur while your policy was active but a claim was filed after your policy ended. Here, the experienced insurance agents at Unity Insurance walkthrough the costs and benefits of tail coverage as well as how they can help protect your business. 

What is Tail Coverage?

Let’s say your professional liability policy expired and you do not renew it.  You add tail coverage for three years to ensure protection against any claims that may be filed after the policy expires. A year after adding the tail coverage, a former client sues your business  for an incident that took place while your policy was still active. Your business will be protected by insurance because the claim was reported during the tail coverage period. 

Tail coverage can only be added to claims-made policies such as professional liability, errors and omissions and directors and officers insurance. It does not apply to occurrence-based policies, because with these policies, coverage is available as long as the insurable event occurred during the policy period, even if you canceled your policy later. 

What are the Benefits of Tail Coverage?

Tail coverage helps to protect you and your business in times of transition. When you retire, tail coverage ensures that you will have liability protection even if you canceled your claims-made policy. When you change your policy, tail coverage protects your prior acts. Tail coverage provides you with extra protection to cover claims that were filed after your policy expired. If a client files a claim after your insurance policy has expired or ended, and you don’t have tail coverage, your insurer will not cover it.

How Long Does Tail Coverage Last?

Tail coverage policies can remain active for a year or longer. Depending on your business and your current circumstances, discussing your options with an insurance agent will guide you in the right direction in purchasing coverage. Purchasing a longer tail insurance policy can ensure that you will be protected if you did not renew your policy or if it expired. In conclusion, the longer tail insurance policy you purchase, the longer your protection will last. 

How Much Does Tail Coverage Cost?

Insurers traditionally charge a fixed percentage of your original professional liability insurance policy that was purchased. When you purchase tail coverage, it will increase the cost of your insurance. Overall, a longer tail coverage period will be more expensive, however you will be protected longer. 

Consult With An Insurance Agent At Unity To Learn More

When making adjustments to your policy, it’s important to consult an educated professional. At Unity Insurance, our goal is to give you the support and guidance you need in developing the best insurance policy for your individual needs. Contact us today for a consultation.