Most professionals understand the importance of liability coverage or malpractice insurance. If you are in an industry where you are at risk for lawsuits or litigation, then you may want to consider tail coverage.
What Is Tail Coverage?
A tail policy or an extended reporting period endorsement provides you with a way to report claims after your policies expire. This is not an extension of your policy period but instead a safety net in case you face any claims against you after your policy expires.
Do You Need Tail Coverage?
Say that you leave your current job and your insurance expires. This might not seem like a big deal at first, but then imagine what could happen if someone files a lawsuit against you for work that you performed at your last job. For instance, if you were a lawyer and you advised a client and he or she filed a lawsuit after you left the firm or your insurance was canceled. You would have to pay for legal fees on your own. Tail coverage protects professionals when this happens. Your insurance may expire, but you still have coverage for work that you already completed.
Tail coverage policies are a safety net. They provide you with the reassurance that you can handle any lawsuit or liability claim that comes your way.
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As a business owner, you are responsible for everything that goes on in your business, even if it means an employee or a contractor you hired created a disaster. Contingent liabilities are the incidents that occur outside your scope of direct control but yet you and the business are financially responsible for. No matter what kind of safety policies you put in place or how thoroughly you stress care and quality in daily operation, you can still find yourself being sued for someone’s mistake.
Same Coverage, Different Name
Contingent liability insurance is a way to protect your company from the financial fallout of dealing with employee, contractor, or agent error. It might also be referred to as vicarious liability or indirect liability. Regardless of what name it goes by, the premise of liability means you are legally responsible for another person’s poor work or wrongdoing according to the workings of legal relationships. Employees are generally the biggest risk with vicarious liability, and whether or not they were abiding by company policies, their actions are pinned on the company.
Should a customer decide to sue your company, you could be looking at thousands and upwards of million dollars in legal fees, lost productivity, settlement costs, and reputation management efforts. An insurance plan addressing vicarious liability helps offset these costs, keeping your business from going under.
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