What is the function of tail coverage?

Tail coverage serves a specific function in the realm of insurance, particularly in claims-made policies. Its primary role is to provide protection for claims that occurred during the period when a claims-made policy was active but are not reported until after the policy has been canceled or expired. This type of coverage is essential because under a claims-made policy, coverage is only valid for claims that are reported during the active policy period. If a claim arises from an event that occurred while the policy was in effect but is reported after the policy's cancellation, the insured would otherwise be left without coverage. Tail coverage effectively extends the reporting period for these claims, ensuring that the insured has protection even after the policy ends, thus mitigating the risk of unexpected liabilities arising from previous activities.

Choices that pertain to different types of coverage or requirements do not fit the specific function of tail coverage, emphasizing the unique purpose it serves in the context of claims-made policies.