TAIL COVERAGE protects against claims that are brought against a doctor after cancellation of a claims-made malpractice policy. (A claims-made policy, as you're probably already aware, protects the policyholder from claims for acts that occur and are reported to the insurer while the policy is in force.)

Calculating the Cost

Industry experts say that as a general rule, tail coverage typically costs between 150% and 200% of the price of a mature claims-made policy. Based on Medical Liability Monitor data for annual manual rates for mature claims-made policies with $1 million/$3 million limits, here are some estimates of what doctors might pay for tail coverage. "Tail rates are tied directly to malpractice rates, and it's no secret what's been happening to them," says Ron Neupauer, president of Medical Underwriters of California, the management company for MIEC, a doctor-owned professional liability insurer that covers more than 6,700 physicians in four Western states. Currently, tail coverage typically costs 150 to 200 percent of the price of a mature claims-made policy. How much you'll pay will depend on where you practice and on your medical specialty. An internist in the Chicago area—who could be paying as much as $41,000 for a mature claims-made policy, according to Medical Liability Monitor, a Chicago-based newsletter—could be looking at a bill of almost $62,000 for tail coverage.

It is a Write Off

Don't forget, too, that you can write off the cost of tail insurance as an unreimbursed business expense on Schedule A of Form 1040, subject to the 2 percent adjusted gross income floor for miscellaneous business expenses.

• Ask your present malpractice insurer whether it has provisions for free tail coverage.


• Practice agreements should state that the employer will pay for, or contribute to, the cost of tail coverage.


• If you have no choice but to pay for tail coverage, see if you can spread out your payments.

Another Cost-Saver

Try to get your new policy with a carrier that offers "prior acts" or "nose" coverage. This does the same thing as tail coverage, but you don't pay a separate premium for it. Instead you begin paying premiums for a new malpractice policy of similar maturity to the one you had with your old carrier, which factors in the risk the new carrier is assuming. If you were in your third year with your old claims-made carrier, for instance, you'll pay the new insurer's third-year rate. For fully mature claims-made policies, the nose coverage extends back to the effective date of the prior policy.

Just because an insurer offers nose coverage, don't assume you'll be able to purchase it.