So What the Heck is “Tail” Coverage?

“Tail” coverage is an insurance term you might have heard, but you may not know what it means.  It definitely doesn’t have anything to do with your pets.  Tail coverage is industry slang used for a period of time after a policy expires, when you can still file a claim.

This may never affect you, and I’m going to go a little bit nerdy on you here.  There are two “flavors” of liability insurance policies:  “occurrence” and “claims-made.”  All the policies you have are probably occurrence forms.  Your home and auto policies certainly fall under this category.  This means that as long as a claim happens during the policy, there’s no hard limit for how long you have to file a liability claim.  There may be some limitations under the law, but not within the policy itself.

Your auto policy is “occurrence” flavored.  Suppose you have an accident while your policy is in force, and you are sued by someone two years later for injuries that weren’t apparent at first. In that case, you’re still covered by the policy, even though it had already expired.

 The claims-made policy is different.  For a liability claim to be covered under this form, the claim must occur after a “retroactive date” (a term beyond the scope of this article, but for our purposes, the policy’s start date).  However, the critical part is that the claim must be made during the policy period or within a strict time limit afterward.  That additional time for filing a claim after the policy expires is called the “tail,” more correctly called the Extended Reporting Period.  Most policies include a 60-day tail automatically, and you can buy extra tail coverage.  I’ve sold “tails” for as long as seven years.  

The tail doesn’t add coverage.  If you have a new accident or claim occur during this time, it won’t be covered.  This is only additional time to file a claim for something that happened before the policy expired.  So, in my auto example above, if it were a claims- made form, there would be no coverage.  If you have a 60-day tail, you must report a claim within 60 days of the policy expiration, or it won’t be covered.  

Not to worry.  Claims-made policies are usually used only for specific commercial liability policies such as medical malpractice, environmental liability, professional liability, and other complex commercial risks.  So, the good news is, now that you know what tail coverage is, you also know you will probably never need it.