Understanding Tail Coverage in Business Insurance
What action do you take when something bad happens to your business after your liability insurance policy has expired? It’s possible to file for an extended reporting period, which includes paying the insurer a fee. This extension is known as tail coverage. Here are more details you should know about business insurance tail coverage.
When Does Tail Insurance Apply?
Business insurance tail coverage only applies to claims-based policies and doesn’t include occurrence-based policies. Claims-based policies include professional liability, errors and omissions, and other coverage for litigation costs. Tail coverage is particularly helpful when a business is going through some type of change. It provides a bit of financial relief for unforeseen events.
Occurrence-based policies, however, cover events that occur during the policy period even if the policy is discontinued. So if several years go by before you learn of an injury that occurred during the policy period, you can still file a claim. It doesn’t matter if you have replaced your insurer or not; you can still get paid for losses that occurred in the period.
Tail coverage can be found in various types of business plans such as coverage for data breaches, management liability insurance, and professional liability insurance. Tail coverage can last up to a year or longer.
Tail Coverage Vs. Nose Coverage
Nose coverage provides protection against events that occurred before purchasing a claims-made insurance policy. It pays for mistakes or oversights you made under a previously insured but expired policy. This insurance, also called prior acts coverage, is based on your current insurer extending coverage.
When you carry nose coverage, it allows for continuous coverage if you decide to switch insurance providers. Active nose coverage can protect you from a current claim if the incident occurs after your policy’s retroactive date. So to clarify, nose coverage is for claims prior to your current policy’s start date, whereas tail coverage is for events that happened while your former policy was active.
Cost of Tail Coverage
Each insurance agency sets its own rates for all forms of coverage, so you have to find the plan that gives you the best coverage you need within your budget. Insurers typically charge a fixed percentage between 100 and 300 percent of your premium for tail coverage. It’s best to buy this add-on while the policy is still in effect.
Benefits of Business Insurance Tail Coverage
One of the most important overlooked benefits of business insurance tail coverage is when you retire it will continue to provide liability protection after your claims-made insurance policy ends. It also protects the work you did in the past under a different insurance plan. Business owners usually have the option to add tail coverage when their insurer chooses not to renew the plan.
Each state has its own laws regarding how tail coverage works, and it’s usually only available for a certain time frame, such as 30 to 90 days. Some insurance companies provide options for unlimited tail coverage. The best way to learn all the benefits and options involved with tail coverage is to talk with an experienced business insurance professional who can provide insights.
Getting business insurance tail coverage can be a helpful option if your company is going through a transition from one insurer to another. Contact the experts at Remland Insurance in Orange, California, to learn more about how your business can benefit from tail coverage. We are here to help you figure out the insurance plan that works best for your business needs.
