An extended reporting period (ERP) is a feature you can add to your claims-made professional liability insurance policy. It allows you to report claims even after your policy expires. This policy endorsement is also known as tail coverage.
An extended reporting period can continue coverage for certain policies after they expire. Typically, if you cancel a claims-made policy for professional liability insurance or another policy type, you will be unprotected if someone decides to sue you and you don’t have an extended reporting period. Two different types of EPRs can protect your business:
Basic extended reporting period. Insurers often provide a free extended reporting period of 30 or 60 days after a policy is canceled or not renewed. This is sometimes referred to as a basic ERP.
Supplemental extended reporting period. This option can sometimes be purchased from your insurance provider, typically ranging from one to five years. Unlimited periods are also available. Some carriers only offer an ERP if the insurer cancels or non-renews your policy.
An extended reporting period does not apply for occurrence-based policies because coverage is available as long as the incident occurred during the policy period.
As a small business owner, you know it’s important to understand how your insurance policy works.
A claims-made policy provides benefits only if you file a claim after the policy start date. If you cancel your policy and then report a claim, it will not be covered.
In this case, if you had a $1 million claims-made policy and are sued for $1 million in your first year, you’d no longer have coverage. That is, unless you increase your policy limit in the second year.
Occurrence-based and claims-made policies are often found in specific types of insurance coverage.
For example, claims-made policies will often be found in your directors and officers coverage and your professional liability insurance, which is also referred to as errors and omissions insurance.
If you’re just starting out, you may want a lower cost claims-made policy.
Get the right coverage for your small business with Insureon today. Click the link to get started.
If someone attempts to sue you for an insurable event that happened while your claims-made insurance policy was active, an extended reporting period will provide coverage even after the policy is canceled. Examples of how an extended reporting period can benefit your business:
Extended reporting periods protect your business in times of transition. They enhance both your financial security and peace of mind, allowing you to focus more on running your business.
Insurers typically charge a fixed percentage of your professional liability insurance policy cost, often between 100% and 300% of your final premium, depending on the supplemental ERP length.
Contact your Insureon agent to add an extended reporting period to your insurance policy. It’s a good idea to do this before canceling your policy because some companies impose a narrow time window for buying an ERP after cancellation.
Some companies may give you 30 days or less after the cancellation (or expiration) to arrange for your ERP. Others require notice of no later than the date of cancellation. In either case, try to learn about your ERP options well in advance of canceling your policy.
There are two types of extended reporting periods: fixed and renewable.
Fixed extended reporting period: A fixed ERP means you can only buy one extended reporting period, and then your coverage is done.
Renewable extended reporting period: With a renewable ERP, you can renew the extension for an additional fee.
Many small business owners and professionals decide to keep working part-time after they retire. They cancel their professional liability insurance and then buy an extended reporting period endorsement to extend their claim-filing period. But here’s the problem: They incorrectly assume their ERP will protect them if they make a mistake after they retire.
An extended reporting period isn’t an actual insurance policy. It simply lengthens the period during which you can file a claim beyond the policy’s cancellation date. Any claims that arise from new incidents during your retirement will not be covered.
You don’t need an extended reporting period if you have an occurrence-based policy and have no intention of ever modifying your coverage. Your policy covers as long as the loss occurs during the policy period. This is true even if you cancel your insurance and a claim arises many years later.
Want to add an ERP to a claims-made policy? Start an online application now or contact your account manager to add an ERP to an existing policy.