Just because your insurance policy has expired doesn't mean your risk has. Liability can follow your business long after a job is finished, a contract is fulfilled, or a location closes. That's why insurance tails, also known as extended reporting periods, are an important way to protect your business from unexpected claims.
Tails give you extra time to report a claim after your policy has ended, as long as the incident occurred during the time the policy was active. For businesses with claims-made policies, tail coverage can be essential.
Claims-made policies cover claims that are both made and reported while the policy is active. If someone brings a claim after the policy ends, and you don't have tail coverage, you may be left without protection-even if the event happened while the policy was in force.
This is different from occurrence-based policies, which cover incidents that happen during the policy period, regardless of when the claim is reported.
Policies can either be written as claims-made or occurrence-based, but most tend to lean one way or the other. For example, professional liability, errors and omissions liability, and directors and officers liability are commonly written as claims-made policies, while general liability is almost always written as occurrence-based policies.
A short-term tail extends the time you have to report a claim by 30, 60, or 90 days after the end of a policy. This is commonly used when switching carriers or reassessing coverage.
A CPA firm switches its professional liability policy on January 1. If a client files a claim on January 15 related to a tax advice mistake from December, a 60-day short-term tail allows the firm to report the claim under the previous policy.
A long-term or unlimited tail allows you to report claims months or even years after the policy ends. This type of tail is often purchased when:
A contractor who also offers design and consulting services completes a large renovation project and then retires. Two years later, the property owner discovers a structural issue that is traced back to a design error, not a construction defect. Because the issue relates to professional services, not physical work, the claim falls under the contractor's professional liability policy. With a long-term tail in place on that policy, the contractor can still report the claim, even though the policy itself is no longer active.
It’s important to note, tail coverage only applies to the policy it is attached to. A tail on your professional liability policy won't extend reporting time on your other policies unless they are also written on a claims-made basis and include their own tail endorsements.
Tail coverage can protect your business from legal and financial exposure long after your day-to-day operations have changed. It may also be required by landlords or clients who expect continued coverage even after a project is complete.
If you're planning to sell your business, retire, switch carriers, or close a location, a tail may be worth considering. It offers peace of mind and continued protection for the work you've already done.
At Concklin Insurance Agency, we help contractors, consultants, and other professionals find the right tail coverage to fit their needs. Reach out to our team to make sure your liability protection doesn't stop short.