What is Tail Coverage?

Tail coverage, also known as an extended reporting period provision, is a type of insurance endorsement that provides coverage for claims filed after the insurance policy ends as long as the claim event occurred during the policy’s benefit period. By doing so, even if an insured decides to cancel their insurance policy, some coverage may still be available for future claims. 

A policy with a tail coverage endorsement is usually accompanied by a higher premium. Moreover, tail coverage is typically determined by insurers by charging a fixed percentage of your current policy premium. This rate ranges anywhere between 100 and 300 percent of the final premium.

Key Takeaways

• Insurance tail coverage provides coverage for claims filed after the policy expires or is canceled if the incident occurred while the policy was active.
• Tail coverage is applied to claims-made insurance policies.
• Tail coverage can either be limited or unlimited.
• Depending on how long coverage lasts or if it is restricted to a specific period of time, tail coverage rates can vary.

Understanding Tail Coverage

Tail coverage is common in a variety of insurance policies, such as professional liability insurance and employment practices liability insurance (EPLI). In general, tail coverage is only applied to claims-made insurance policies, not occurrence policies. The main reason for this is that occurrence-based policies provide coverage for events that occured while the policy is active, regardless of when the claim is filed. 

There are a few key advantages of tail coverage. In addition to improving financial security, tail coverage gives you peace of mind that you will remain protected regardless of whether you decide to switch or terminate your current insurance policy. Therefore, although this endorsement can be pricey, it can save you from financial strain in the long run.

How Long Does Tail Coverage Last?

Longer tail coverage means longer protection. Extended reporting period provisions are calculated using a number of factors, including the type and availability of the insurer's policies. In order to determine how much tail coverage fits your personal needs, it is highly recommended to consult with an insurance attorney. 

A tail coverage policy can last forever, even after the policyholder's death, if someone files a claim on his or her behalf. Alternatively, some insurers may only offer up to a year of tail coverage. 

Bottom Line

In order to purchase tail coverage, you will usually need to make a one-time payment shortly after your policy is canceled. As soon as your current coverage ends or you switch to a different policy, you should buy tail coverage immediately to make sure you’ll be protected in the future. In any case, tail coverage quotes are typically valid for a period of up to 60 days and the quotes cannot be reissued after expiration.

Do you have any more questions about tail coverage? Find out if a tail coverage provision is right for you by speaking with an expert insurance attorney.