When Do You Need Extended Reporting Period Coverage?

tail coverage definition

What do you do when your errors & omissions policy ends but the issues it covered continue? Extended reporting period coverage, or tail coverage, is an important add-on to have in your corner. A simple tail coverage definition is a provision included in your policy designed to cover incidents that occurred when the policy was active but were reported after it expired. There are several situations when such a provision may prove useful.

The most common occurrence is the expiration of a policy. For example, if your E&O policy term is for one year but you have tail coverage for a full year afterwards, any additional claims on problems that arose during the policy term can still be made the year after the policy expires. You will also likely need tail insurance if you sell your business. The new owner is not going to want to be held liable for claims made against actions that occurred on your watch. Many new owners may require a minimum of three years tail coverage before they will consider buying an existing business.

A tail coverage definition includes any coverage that extends beyond an insurance policy’s term limit for incidents that occurred during the term. It can protect you and anyone you do business with from claims that are made after the policy is no longer active.