While most agencies recognize the value of tail insurance, cost can still be an issue. You may wonder how much insurance you need, and for how long you need it, to protect yourself from claims made about events that occurred when your Errors & Omissions policy was in force.
How Much Do You Need?
Every agency is different, and has different levels of need and risk, but the simplest rule about any insurance is to buy as much as you can afford. In terms of tail insurance, this has to do with both the size and the length of the policy.
How Does It Help?
Tail insurance is critical in situations where a claim is brought for work done some time in the past. You may have bought or sold an agency, or reduced your offerings, but you can still be held liable for the results of work you did previously. Tail coverage extends the reporting period for such claims, so that damages and legal fees can be covered even after your E & O policy has expired.
When you are considering tail coverage:
- buy as much as you can afford
- buy coverage for a minimum of 3 years
- buy a policy that is bilateral; you can use the coverage as long as your policy did not cancel for default
Discuss your needs with a qualified insurance broker, and make sure that you have the coverage you need to protect your future.