STAND-ALONE TAIL COVERAGE
Over the last few years more insurance carriers have started writing Stand-Alone Tail Coverage. A Stand-Alone tail is basically a separate tail insurance policy written by another insurance company that didn’t write the original claims made policy (i.e., they were not the incumbent carrier). During the hard market, Stand-Alone Tail coverage didn’t exist. However, in this soft market environment with declining rates, insurance companies are competing for business and doing whatever they can to develop new revenue streams. As a result, many stand-alone tail coverage options are now available.
Stand-Alone Tail policies can be cheaper. For example, we recently received a call from doctor looking for tail coverage options. She was leaving her group in one state, and moving to the Midwest. The incumbent carrier was charging $68,000 for her tail coverage. We searched the market and were able to secure a stand-alone tail coverage policy for this doctor at a cost of $46,000. This was more than 32% less than the incumbent carrier which saved the doctor $22,000! All from a top quality, “A” rated carrier with well over $1B in assets, a lifetime reporting period, and quarterly payments with no finance charges. Definitely a nice outcome.
REPLACEMENT TAIL COVERAGE
Replacement Tail Coverage is a Stand-Alone Tail policy that simply replaces a previously issued tail.
Why would someone need to replace a tail? If you received retirement tail coverage and the insurance company that issued the tail goes bankrupt, your retirement tail coverage is now void. Or, if you purchased tail coverage before becoming employed by the hospital, and the insurance company that provided your tail is being liquidated, your tail coverage is now worthless too. In both cases, you will have uninsured exposure unless you purchase Replacement Tail Coverage.
The single most important malpractice insurance decision a physician may ever make is the quality of his/her tail coverage. Simply put, the insurance company must have the financial strength to be around when it’s time to pay your potential tail claims in the future.
The best tail coverage will be issued by carriers rated “A” (excellent) or higher by A.M. Best and provide an unlimited reporting period for future claims. Does your tail coverage meet these standards? If not, give us a call and we can help.
By: Steve Sopyla, CPCU