Tail coverage is often referred to as its own form of insurance, but the reality is a bit more complex. It’s true you can buy tail insurance as a standalone policy without going through the insurer whose coverage the tail attaches itself to, but it’s also true you can buy an extended reporting period rider for your insurance when you purchase a policy, so there is an option to include tail coverage in a basic policy. Each of those strategies has its own advantages and disadvantages, and the right choice is often situational.
Advantages of Tail Coverage
Purchasing an ERP as a policy feature does make organizing your risk management simpler, but it can also create additional costs that bloat your overhead. You don’t always need tail policies if, for example, you have a policy that you’re renewing term to term with no intention of canceling. Most of the time, you can count on the policy to allow reporting as long as coverage is continuous, even through renewals. There are exceptions, and if you need to know which way a policy is written, you should ask the agent you worked with. Tail coverage you buy when winding down a policy, on the other hand, doesn’t begin to cost you money until you actually need the extended reporting time, so it helps you manage your overall costs very effectively.