Tail coverage insurance extends the coverage of your Errors & Omissions policy. If claims or incidents are reported after your policy is no longer in force, you still have protection and resources to help you deal with legal fees and damage claims.
When Do You Need a Tail?
If you are buying, selling, or closing an agency, tail coverage provides important security. Long after you’ve oved on, clients may have problems that lead them to file claims against you. Though you were protected at the time the work was done, that protection will end with the expiration of your Errors & Omissions policy is you do not put tail coverage in place. The same kind of problem could arise if you eliminate services or downsize and adjust your policies in ways that leave you with exposure.
What Do You Need?
No one standard exists for tail coverage, but these are good rules of thumb:
- buy all the coverage you can afford
- when buying an agency, verify that the seller has at least a 3-year tail in place
- look for a bilateral policy, that will cover you whether you cancelled your policy or the carrier did, for any reason other than default
- extend coverage into the future for long enough to feel confident
Check with an experienced agent to see what kinds of terms are available to you, and what best meets your needs. Don’t let a past mistake jeopardize your future.