Insurance tail is a term you are not likely to hear if you don’t provide professional services to clients in the medical and legal fields, where talk of tail coverage is predominate. The term is often tied to malpractice insurance and errors and omissions coverage.
In short, insurers offer tail coverage as a way for professionals to protect themselves from liability after their traditional coverage has expired. For an additional premium, the product allows a customer to submit a claim for services provided during the coverage period after the period has expired.
For example, if a physician bought a malpractice policy that covered her from Jan. 1, 2018, to Dec. 31, 2018, she could purchase insurance tail coverage from, say, Jan. 1, 2019, to Dec. 31, 2019. This allows her to file a malpractice claim during 2019 if the work she is filing the claim against was provided in 2018, during the original policy period. Tail coverage would not protect her for services rendered in 2019.
Tail coverage is often called extended reporting period provisions. It often applies for a limited time only, typically a year after the original policy term ends. Some professionals will use tail coverage as a way to fill the gap between policies if they are changing offices, taking time off, or shortly after they retire.