When you’re thinking about insurance, tail coverage might not be the first policy you consider. But if you are thinking about buying, selling, or closing an agency, or just reducing the scope of services you offer, tail coverage can be a critical component of your insurance portfolio.

Past Mistakes, Present Problems

Tail insurance provides a reporting extension for claims or incidents that are alleged to have occurred during the time when a normal Errors & Omissions policy was in effect. If a client makes a claim for work done in the past, and your E & O policy is no longer in effect, tail coverage can provide the necessary protection and support to handle legal fees and damages.

Scope of Coverage

It’s best to talk with your broker or carrier to determine exactly what policy parameters best suit your situation. Most agencies operate according to the following general guidelines:

buy as much coverage as you can afford

consider both the length of the policy and the extent of the policy
if you are buying an agency, make sure that the seller has tail coverage of at least three years’ duration

Insurance tail coverage is a critical component of your overall protection when you are moving on to a new stage. By extending you reporting period, you make sure that you can put your focus on the future.