If you are considering canceling your insurance program, you may want to consider getting insurance tail coverage. Perhaps you’re selling your business, so you’ll no longer need the insurance company covering you. In that case, it’s clear that you’d want to cancel the plan and no longer be under the financial care of the insurance company. However, after selling your business, if a previous client were to make a claim on malpractice or another action in a lawsuit, you would no longer have the insurance company to cover the fees. In that case, everything would be out of pocket.
This Is When You Need Tail Coverage
Rather than continuing to pay for coverage for a business you sold, you can purchase an insurance tail policy after canceling. When you do this, you are no longer covered for future incidents, but claims made later on for earlier actions done during the coverage period can be handled by the insurance company. This means if you had coverage from 2010-2020 and closed at the end of 2020, if a claim is later made for something that happened in 2018, the insurance tail coverage will have it handled.
How Long Does Tail Coverage Last?
This depends on the policy. Some can last a lifetime, while others may be cheaper due to only lasting a few years or less. Obviously, it’s more likely that lawsuits be brought up sooner than later, so make a decision based on your finances.