Should You Have an Extended Reporting Period on Your Insurance Policy?

For professionals, like engineers and architects, professional liability insurance is a necessity. This type of insurance is more than general liability as it protects from mistakes caused through omission, negligence, or misleading statements. A policy with an extended reporting period attached to it will add an extra layer of protection.

The extended reporting period on an Errors & Omissions policy is to protect in the event that the professional is changing a claims-made policy to another company, or has failed to renew the current policy. This extended report period continues coverage for services made during the policy period. It does not, however, offer protection for new projects.

A policy that has this endorsement attached to it is going to be more costly than a policy without it. In some cases, it can cost up to twice the normal premium. However, the protection it affords while searching for a new policy is well worth the investment. For example, if an engineer is not covered by this extended period, they will be liable for 100% of any damages sustained in a failure of a project they worked on. This can be hundreds of thousands, to multi-millions of dollars.

An alternative to the extended reporting period endorsement is a prior coverage policy attachment. This is basically a policy attachment that covers you for prior services once you start a new claims-made policy with another company. Again, it is going to be an added expense to your premium, but will give protection for several years after doing the project.

The extended reporting period endorsement to your professional liability insurance policy is well worth the extra cost. (In some cases, insurance companies offer this coverage for no cost, if certain criteria are met.) The amount of protection and confidence it can provide is well worthwhile.