Tail Coverage
Extended reporting period insurance that covers claims made after a claims-made policy expires, for incidents that occurred during the active policy period. This coverage protects against lawsuits filed after your policy ends but related to work performed while the policy was active.
Example
“Dr. Smith purchased tail coverage when retiring to protect against any malpractice claims that might arise from patients she treated during her final years of practice.”
Memory Tip
Think of a dog's tail - it extends beyond the body just like tail coverage extends beyond your policy's end date.
Why It Matters
Without tail coverage, professionals could face personal financial ruin from lawsuits filed years after their insurance expired. This is especially critical for doctors, lawyers, and consultants who may face claims long after completing their work.
Common Misconception
Many people think their claims-made policy automatically covers future claims, but it only covers claims made during the active policy period. Tail coverage must be purchased separately and can be expensive, sometimes costing 2-3 times the annual premium.
In Practice
A surgeon pays $50,000 annually for malpractice insurance and retires in December. She purchases tail coverage for $150,000 that lasts 3 years. In year two of retirement, a patient sues for a surgery performed in her final year of practice. The tail coverage pays the $2 million settlement, protecting her retirement savings.
Etymology
The term 'tail' comes from the concept of the policy's coverage period having a 'tail' that extends beyond the actual policy expiration date, much like an animal's tail extends beyond its body.
Common Misspellings
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Related Terms
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See Also
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