Protections Under Tail Coverage

what is tail coverage

When agency owners decide that it’s time to close up shop and sell the business, loose ends and unfinished transactions can be the only thing holding them back from a clean break. Also consider the situation from buyers’ perspectives, as they may be hesitant to take over an agency with existing errors and omissions claims that need to be resolved. Luckily, tail coverage is the perfect solution to these types of scenarios, but what is tail coverage exactly?

How It Works

Tail coverage can be looked at as an extended policy that can be added on in case an agency’s current coverage is not sufficient enough to accommodate current E&O claims that will take time to resolve well beyond the date that an agency closes or decides to sell. In the following scenarios, tail coverage is a highly-recommended investment:

Bilateral coverage – protects both owner and/or policy carrier
Longer coverage – when the term offered covers a longer period of time, ideally a minimum of three and up to ten years as this reduces the chances of not being covered when dealing with resurrected claims  in cases of negligence, especially for agencies that plan to close

Because of the advantages of tail coverage, it is important that companies closing or in the process or transitioning ownership of their agency, turn to resources to answer the question “What is tail coverage?” This is because it is a policy that those in these positions can’t afford to overlook.