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By Edita Abrudeanu, Founder & Principal Broker — Professional Insurance Experts, LLC
Don’t Let Your Insurance Lapse: The Truth About Extended Reporting (Tail) Coverage
Because claims don’t care that your policy ended
A client calls you six months after you’ve closed out a project.
There’s an issue — a design flaw, a contract dispute, a “we just noticed…” moment.
You think, “That project’s long done. My insurance will handle it.”
Except your policy ended months ago.
And unless you added tail coverage (an Extended Reporting Period, or ERP), you’re not covered.
That’s the part too many professionals learn after the damage is done.
01. What Tail Coverage Really Is
Think of tail coverage as a safety net for your past work.
It extends the time you can report a claim after your professional liability policy expires.
Without it, you’re only covered for claims reported while your policy is active.
That means even if the mistake happened during coverage — if the client files later — your insurer can deny it.
With tail coverage, your protection continues for a set number of years after the policy ends, covering claims from work done while the policy was active.
02. Who Needs Tail Coverage (Hint: Almost Everyone)
Tail coverage isn’t just for firms shutting down. It matters any time there’s a potential gap between policies — like when:
- You switch carriers and the new one won’t backdate to your old retro date.
- Your firm closes, merges, or sells to another entity.
- You retire, or a partner leaves the firm.
- You take a break from business and plan to restart later.
Even a single uncovered week can be enough for a claim to slip through.
03. Real Story: The Partnership Fallout
Two partners ran a design firm. After years together, they split — one retired, the other kept the company.
Neither wanted to pay for tail coverage.
A year later, a client from an old project filed a negligence claim.
Guess who paid the legal fees? Not the insurer.
Each partner personally.
Tail coverage could’ve saved them tens of thousands in defense costs.
04. Types of Tail Coverage
Basic ERP: Automatically included by some carriers for 30–60 days after policy expiration. It’s short-term, but better than nothing.
Supplemental ERP: Purchased add-on that can extend reporting for 1–6 years (sometimes unlimited). Costs anywhere from 100–300% of your annual premium, depending on duration.
Tip: Don’t let the price tag scare you — paying a bit more upfront is far cheaper than covering a six-figure lawsuit out of pocket.
05. When to Buy Tail Coverage
You can’t add it retroactively. Once your policy expires, the door closes.
That’s why timing is everything.
If you’re canceling, selling, or non-renewing, talk to your broker before the policy end date.
You’ll usually have a short window (often 30 days) to elect ERP coverage — after that, it’s gone for good.
06. How Long Should You Extend?
There’s no one-size answer.
But as a rule of thumb:
- Low-risk firms (simple consulting, no physical construction exposure): 1–3 years
- High-risk professions (architects, engineers, law firms): 5–6 years minimum
- Retirement or closure: Go for the longest term offered — you won’t get a second chance
Remember: a lawsuit can appear years after a project ends. Tail coverage keeps that window covered.
07. What It Costs — and Why It’s Worth It
Tail coverage pricing sounds steep at first — often equal to one or two annual premiums.
But think about what you’re actually buying:
Peace of mind for every project you’ve ever completed under that policy.
No late-night worries about whether a client email could ruin your year.
If a claim shows up tomorrow for a job from three years ago, you’re protected.
08. The “House on Fire” Analogy
Here’s the simplest way to think about it:
Buying tail coverage after your policy expires is like trying to insure a house while it’s burning down.
You can’t.
Tail coverage only works when it’s in place before the lapse — not after.
So if your policy’s renewal date is approaching and you’re unsure what’s next, make that call now.
Final Takeaway
A professional liability policy protects your present.
Tail coverage protects your past.
Both matter — because mistakes and claims don’t follow your schedule.
If you’re retiring, merging, or even pausing operations, don’t roll the dice on uncovered years.
A single claim can erase everything you built.
Ready to Make Sure Your Coverage
Actually Protects You?
Let’s review your policy and uncover any gaps before they become problems.