What it means
When a claims made policy is canceled or not renewed, claims reported afterward are normally not covered. An extended reporting period, commonly called tail coverage, extends the time to report claims for incidents that happened between the retroactive date and the end of the policy.
Many policies include a short automatic reporting window and offer a longer optional tail for additional premium, which must be purchased within a set deadline.
Tail coverage matters when a business closes, sells, retires or moves to an insurer that will not keep the prior retroactive date. It does not cover new incidents after the policy ends.
An example
After fifteen years, the owner of Laurel Hill Inspection Services retires and closes the business. She buys an extended reporting period on the claims made professional liability policy, so claims about past inspections reported during the tail period remain covered.
Names in this example are fictional.
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How much does tail coverage cost?
It is usually priced as a percentage of the expiring annual premium, and longer reporting periods cost more. The exact cost and terms vary by insurer and policy, and the option must usually be purchased within a short window after the policy ends. Review the extended reporting period section well before that deadline.
Do I need tail coverage if I switch insurers?
Not if the new insurer keeps your existing retroactive date, because the new policy then covers past work. Tail coverage becomes important if the new policy has a later retroactive date, or if you stop buying claims made coverage entirely. Compare both options before letting the old policy lapse.
General information only. It is not legal or insurance advice. Only issued policy documents and endorsements describe actual coverage.