Tail Coverage

Tail coverage acts as an insurance safety net for business owners who have recently sold their company, protecting them from potential legal claims arising from actions taken during their ownership period. This specialized insurance extends liability protection beyond the standard policy period, typically for three to six years after the original policy expires.

The coverage is particularly crucial in mergers and acquisitions, where sellers remain vulnerable to lawsuits related to their previous business operations. Without tail coverage, business owners could face significant financial risk from claims discovered long after the sale of their company.

There are two primary types of tail coverage: reporting tail coverage and discovery tail coverage. Reporting tail coverage allows claims to be reported within a specified period after policy expiration, while discovery tail coverage protects against claims discovered during the extended reporting period.