How Does An Extended Reporting Period In An Insurance Policy Work?
“How does an extended reporting period in an insurance policy work?” is a common and important question that every organization buying professional liability insurance, errors & omissions insurance, directors and officers insurance and/or any other insurance policy that is written on a claims-made basis. Not understanding or not working with an insurance broker that understands how claims-made insurance policies work can put you and your organization at significant risk of a financial loss if mistakes are made. In contrast, ALIGNED Insurance brokers would be happy to answer the question “How Does An Extended Reporting Period In An Insurance Policy Work?”, and this post will explain it. Kindly also note that an extended reporting period in an insurance policy is also often called: runoff insurance and/or tail coverage
Why Is An Extended Reporting Period In An Insurance Policy?
An extended reporting period in an insurance policy exists because insurance companies that offer claims-made insurance products intentionally structure them to effectively “cap” or “silo” the risk they take on and only respond to claims that become known while the policy or extended reporting period is enforced. An extended reporting period in an insurance policy is an insured’s way to protect themselves against claims that become known after they cease buying claims-made insurance, which often happens when an organization is acquired, shuts down, ceases doing certain activities and/or goes bankrupt.
How Does An Extended Reporting Period In An Insurance Policy Work?
An extended reporting period in an insurance policy begins on a certain date which is mutually agreed to by the insured, the insurance broker and the insurance company. Once triggered it provides coverage for any claims that become known after the effective date of the extended reporting period from acts or actions of the insured that occurred prior to the date of the extended reporting period.
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