Tail Coverage: What is it, how does it work, and when am I eligible?

Tail coverage is also known as an "Extended Reporting Endorsement," and it can be purchased (or earned) when terminating a claims-made policy. 

This coverage allows the insurance carrier to respond to any claims arising after the policy's termination date for a claim that occurred while the policy was active.

Without this coverage, physicians and corporations can be left exposed for potential claims which may arise without insurance to respond to these claims.

When terminating a policy and moving to a new practice's policy, if the new carrier will provide prior acts coverage, you will NOT need to purchase tail coverage, as the new policy will keep the retroactive date of your terminating policy and respond to any claims that occur after the retroactive date.

Some carriers have physician loyalty programs in place to reward physicians with tail coverage at no cost upon death, disability, or retirement from the practice of medicine. Insureds do typically have to sign an affidavit of retirement or disability. Rules and regulations vary by carrier. 

If I have already earned the free retirement tail with my current carrier, do I need prior acts coverage if I change carriers?

Although you may already be eligible for the retirement tail at no cost with your current carrier, that tail coverage would only be activated when you retire completely and permanently from the practice of medicine. Therefore, if you continue practicing and move your coverage to another carrier you lose your retirement tail benefits, and would need the new carrier to pick up your "prior acts" exposures. Once you place your coverage with another carrier, you start the vesting process in their retirement tail eligibility.

Am I eligible for a free retirement tail?

Every Doctor Wants a Free Retirement Tail

At some point, every physician will retire from the practice of medicine, but physician practices have become very complex and the ability to retire from such a career has become complicated. Physicians face a varied future when they retire, from volunteer work, to relocating to a birth country, to simply spending time with their family and friends. But one thing is true – all physicians want their free retirement tail after years of paying for their professional liability insurance.  

“55 & Five” No More

Professional liability policies traditionally offered doctors a free retirement tail after reaching a retirement age of 55 and having at least five consecutive years of coverage with the same carrier. However, in today’s environment, many physicians do not want to completely retire from the practice of medicine. This oftentimes puts a physician at odds with their carrier since they do not meet the requirements set forth for free retirement tail coverage.

Most professional liability insurance policies today have some sort of modification to the standard “55 and Five” rules previously used, ranging from 55 years of age and one year of coverage with a carrier, to 10 years of consecutive coverage with a carrier and no retirement age limit.  

Value

The premium value for a retirement tail can range from 2–3 times a physician’s current annual premium. Additionally, many carriers now have loyalty programs offering large payouts of funds to a physician if they stay with the same carrier until retirement. If a physician is not eligible for full retirement under the terms set forth by the carrier, they would not only be subject to purchasing their tail coverage, but would also lose out on these loyalty program funds (if applicable), which can sometimes exceed several thousand dollars.

Options

Some carriers will allow a physician to continue working in some capacity (mainly in a position completely different than what they did before) and still receive the free retirement tail. However, many physicians are never completely sure they will not return to medicine. So what happens if/when a physician changes their mind after retirement? This question is the most difficult to answer because the insurance companies do not have public rules or published guidelines for every possibility, and each scenario must be individually evaluated by an underwriter.

When a physician asks how they can qualify for the free retirement tail, I have to respond carefully, first asking what they consider retirement. If they have any plans to continue to working for compensation, I warn them the free retirement tail will be at risk, as well as any loyalty funds they may have received. The revelation of all the rules and conditions of retirement are often shocking as the details are explained.

Physicians should become familiar with what their carrier requires in order to obtain the free retirement tail, and then see if retirement plans can be accommodated before they reach the expected retirement date. After years of hard work and important medical practice, a physician should feel comfortable obtaining the free retirement tail coverage from their carrier and enjoying their retirement years.

Contact us if you have any questions or call 800-318-9930 to speak with an agent.