Frequently Asked Questions about Tail Coverage
- What is the definition of tail coverage?
- Who pays for tail coverage and how much does it cost?
- What are the benefits of tail coverage?
- Expert(s) Who Answered
What is tail coverage?
I've been a plastic surgeon for the last 30 years. I'm ready to retire, but know that I can still be held liable for the surgeries I've performed over my career. What is my best insurance option?
Tail coverage insurance was designed for professionals like you. Tail coverage is a type of insurance that you add at the end of your policy. If you've been a doctor for 30 years, you've had liability insurance during that time, in case a patient made a claim against you. However, once you retire, you're no longer going to keep your full liability insurance coverage. But as you said, you performed thousands of surgeries, and any patient could come back and file a claim against you. Tail coverage will protect you in case someone files a claim.
Tail coverage isn't just for professionals who spend their careers working with people. A second type of tail insurance is for discontinued products or operations. If you own a business that manufactures binders and you've been doing it for 30 years, but decide to stop operating your business, your binders are still out in the world. They could still hurt somebody, which could result in a products claim, and you would need insurance to protect you against the claim. Tail coverage insurance is that protection.
Who pays for tail coverage and how much does it cost?
I built a great career for myself by repairing car brakes. My insurance agent is recommending that I look into tail coverage after I retire, in case any of the brakes malfunction and I'm held liable. If I obtain tail coverage, do I pay the premium or my company?
Tail coverage is paid by the insured, which is you. The cost of tail coverage can be quite high, but in general it is a multiple of your last year's premium. That means it will be two, three, or five times as much as you were paying for your insurance premium during your last year of coverage.
Typically there is a window of opportunity at the end of your last policy for you to buy your tail insurance. You have to purchase it from the same insurance company, but it is a guaranteed feature if you want it. You just have to tell your insurance company that you want to purchase it.
What are the benefits of tail coverage?
I've never been sued in my life for a liability claim, do I really need tail coverage?
If you've been providing a service or producing a product that could potentially result in a liability claim against you, then it's worth investing in tail coverage.
Once you retire, you want to enjoy that retirement. That can easily be ruined by someone's brakes going out in their car or a patient realizing that they had a sponge left inside them during surgery and they decide to file a claim against you.
If you're in a position where a claim can be made against you in the future for something you've done or created in the past, then having insurance that can respond to that claim is worth the price.