Insurance glossary · Deals and private equity
tail coverage.
Also called Extended reporting period.
Tail coverage extends a claims-made policy after it ends, so claims made later about earlier events are still covered. It usually comes up at a sale or a switch.
When do you need tail coverage?
When a claims-made policy ends and nothing replaces it with the same retroactive date: closing or selling the business, retiring, switching to an insurer that won’t keep your retro date, or moving to an occurrence policy. Without a tail, claims made later about past work aren’t covered.
What does tail coverage actually cover?
Claims made during the tail period about acts or events that happened before the policy ended. It doesn’t cover anything that happens after the policy ends.
How long can a tail last?
Options vary by insurer and coverage, commonly from one year to several years, and some offer an unlimited tail. Many policies also include a short automatic reporting window after they end, and some states require insurers to offer longer tails on set terms.
Does the tail have its own limit?
Usually it shares the expiring policy’s aggregate rather than adding a new one, though some states and policies require or offer a fresh limit. The wording matters, since a long tail with a shared limit can be thin.
How much does tail coverage cost?
Usually priced as a percentage of the expiring annual premium, rising with the length of the tail, and typically paid once up front. The price is often set in the policy, so it’s worth checking before you need it.
Who buys the tail when a company is sold?
The purchase agreement decides. Sellers often buy a tail on directors and officers, employment practices and professional policies at closing, because the policies usually stop covering new acts at a change in control.
Is prior acts coverage an alternative to a tail?
Yes. If the new insurer keeps your retroactive date, it covers the past and you don’t need a tail from the old insurer. Which costs less depends on the market and the coverage.
Does tail coverage work differently by state?
Some states regulate it. New York and North Carolina require insurers to offer tails on set terms, Texas requires an automatic reporting window and a purchasable tail, and other states leave it to the policy. The notes below cover Riza’s licensed states.
in the states where Riza is licensed.
Riza is a licensed insurance agency in New York, Colorado, Texas, Florida, Massachusetts, Arizona, Nevada, North Carolina, New Jersey and Georgia. Notes below cite the law they come from. Detailed write-ups cover Arizona, Nevada, Texas, North Carolina and New York. One-line notes for other licensed states appear with them when this term has one.
- ArizonaArizona has no statute or insurance rule requiring a tail offer on business claims-made policies, including directors and officers and employment practices. Courts enforce claims-made reporting terms as written, so a tail comes down to the policy and negotiation.Sletten v. St. Paul Fire & Marine Ins. Co. (Ariz. App. 1989)contractors in Arizona →
- NevadaNevada’s tail statutes apply to medical professional liability, not to business directors and officers, employment practices or general liability, so tail terms for business policies come from the policy.NRS ch. 690Bcontractors in Nevada →
- TexasTexas requires claims-made policies reviewed by its insurance department to include a short automatic reporting window and the option to buy a tail of at least one year, with time to elect it, and general liability and umbrella forms must make an unlimited tail available. Forms for large businesses are exempt from that review.TDI, review checklist: commercial general liability · TDI, review checklist: miscellaneous professional liabilitycontractors in Texas →
- North CarolinaNorth Carolina gives general liability and professional liability insureds a set window after cancellation or nonrenewal to buy a tail at the full expiring aggregate, and state guidelines require a tail offer of at least one year. Whether directors and officers coverage counts as professional liability under the statute is unclear.N.C.G.S. § 58-40-140 · NCDOI, guidelines for claims-made policiescontractors in North Carolina →
- New YorkNew York requires an automatic reporting window and a tail offer when claims-made coverage ends or is cut back, with a shorter required offer for directors and officers and employment practices. If a company is liquidated or closes without buying the tail, covered individuals can request it themselves within a set period.11 NYCRR § 73.3 · 11 NYCRR § 73.1contractors in New York →
by trade.
- General contractorsProfessional and pollution policies for design-build or environmental work are often claims-made, so closing or switching needs a tail plan.
- PlumbingClaims-made pollution coverage for septic or environmental work needs a tail if it isn’t continued.
where you’ll see it.
- Policy conditionsAn “extended reporting period” section listing the automatic window and the purchase option.
- Nonrenewal noticesA notice of your right to buy a tail and the deadline to elect it.
- Deal documentsA requirement that the seller buy tail coverage on management liability at closing.
no claim falls between policies.
Before a claims-made policy ends, Riza compares a tail with prior acts coverage from a new insurer, prices both, and makes sure you elect in time.
Get a quoterelated terms.
Longer guide: Exit-ready insurance and the D&O tail
Coverage it touches: D&O and employment practices · Insurance due diligence