What is Tail Coverage in Professional Liability Insurance?

Protecting your company and yourself from unexpected lawsuits requires knowledge of professional liability insurance, especially when changing policies or career stages. Professionals and businesses should understand tail coverage insurance, one of the most crucial types. Because tail coverage extends coverage beyond the active policy term, it gives professionals peace of mind when they leave a company or discontinue certain services.

Insure Your Company understands that small businesses and consultants must protect their businesses and careers from legal action after a policy expires. This blog will discuss the definition, operation, and importance of tail coverage, particularly for companies that provide professional liability insurance to consultants and other service-based occupations. By the end, you’ll know more about how to incorporate this type of coverage into your business plan and how Insure Your Company can help you obtain the necessary protection..

What Does Tail Coverage Mean in Insurance?

Tail coverage is an extension of professional liability insurance that covers post-policy claims related to events during the active period. Consulting, freelancers, and businesses that may lose coverage after switching providers or retiring need an Extended Reporting Period (ERP).

Why Tail Coverage is Essential for Consultants

Consultants and other professionals need tail coverage insurance to protect them from claims after client relationships end. According to a 2020 survey by the Professional Liability Underwriting Society (PLUS), 30% of consultants received post-contract claims. This statistic shows professionals’ real risk after a contract ends, highlighting the need for longer reporting periods.

Consultants work with many clients over the years, and the chances of a claim arising after the fact are quite high. Tail coverage allows consultants to transition between contracts or retirement, knowing they are protected for incidents that could have occurred during their tenure.

How Tail Coverage Insurance Works

Tail coverage insurance works by extending the length of time that a professional liability policy will provide coverage after it has expired. Tail coverage typically lasts 1–5 years after the policy term, depending on the insurer. It usually works like this:

When It’s Triggered: Tail coverage applies to claims filed after the policy expires or is cancelled for incidents that occurred during the active policy period. Tail coverage insurance protects professionals and businesses from uncovered claims..
What It Covers: Tail coverage usually covers the same incidents as the original policy. Including errors, omissions, malpractice, and negligence. Tail coverage insurance protects consultants who make recommendations that cost clients money after the policy expires.
How Long Does It Lasts? Tail coverage duration varies by insurer, and some extend coverage for 1 year, others for 5 years, and this flexibility lets professionals choose the right coverage.

When Should Tail Coverage Be Considered?

Tail coverage is especially important in certain circumstances. If you are:

1. Retiring or leaving a profession: If you are retiring or leaving a job as a consultant and moving to a different field, tail coverage ensures that you will not be liable for claims that were made against you while you were still working in whatever field you were working in.
2. Changing your professional liability provider: Tail coverage ensures that there is no gap in coverage between policies in the event that you switch insurance companies. Tail coverage makes this possible when you switch providers of professional liability insurance.
3. Ending your practice or project: When you stop working for a client but continue to be concerned that you might be sued, tail coverage gives you the ability to protect your business or practice for a significant amount of time after you have stopped working for that client.

For consultants, small business owners, or any professional transitioning between contracts, tail coverage insurance acts as an essential safeguard.

What Are the Benefits of Tail Coverage?

Protects Against Unknown Claims:
It is possible that unexpected issues will come up even if you believe that there haven’t been any incidents while you’ve been working. Tail coverage ensures that you will be covered if a client chooses to file a claim after the policy has expired.

Risk Free for Retirement or Career Transition:
It is common for consultants to cease actively managing their client relationships as they retire or change careers. Because of the tail coverage, they can be sure that any claims from earlier work will still be covered.

Avoid Financial Liability:
The cost of defending against a lawsuit can be high, not to mention the cost of paying damages or settlements. If you have tail coverage insurance, you won’t have to worry about an unforeseen claim ruining your finances after your policy expires.

Get the Protection You Need with Tail Coverage with Insure Your Company

For consultants and companies in a variety of industries, Insure Your Company provides complete professional liability insurance. We assure that your company is sufficiently protected against potential claims, both during and after your policy term, with customised solutions and knowledgeable guidance. Our tail coverage insurance makes sure you’re protected when it counts most, whether you’re changing insurance companies, moving between contracts, or getting ready for retirement.

Whether you are a consultant, small business owner, or in the process of changing contracts, having tail coverage insurance is crucial for protecting your assets and career. With Insure Your Company’s extended reporting periods, you can obtain the right protection, shielding your company and professional reputation from unanticipated claims that emerge after your policy expires.

Ready for the right business protection? Contact Insure Your Company for professional liability and tail coverage quotes today.

Dan Levenson

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