Why do I need insurance when I retire?

By Stephanie Jaynes, Marketing Director, InspectorPro Insurance

After 25 years of crawling through attics, writing reports, and protecting homebuyers, Rick Nelson hung up his flashlight and retired from home inspecting. He sold his business, moved closer to his grandkids, and even started travelling. Then, four years later, he returned from an RV vacation to an attorney letter.

One of Rick’s clients had discovered major water intrusion behind the walls. Their attorney said they had photos from the listing that showed visible signs of damage at the time of the inspection, too. And they were ready to take Rick to court to prove he was liable.

Rick’s heart sank. His mind raced with questions:

• Am I really liable for this?
• How should I respond?
• What’s this going to cost me?

As Rick tore through his old inspection files and emails, he remembered something that banished his anxiety: He had tail coverage.

Tail coverage, or an extended reporting period (ERP), allows inspectors to continue reporting claims for past inspections after they retire, sell their company, or otherwise leave their business.

Most home inspector insurance policies are claims-made, meaning inspectors need to have current and continuous coverage to get protection. You only have coverage for inspection claims that occur on or after your retroactive date and until your policy expires. By increasing your claims reporting window,  an extended reporting period provides indemnity and defense for conflicts that could surface after you retire.

Why is tail coverage important?

You may be thinking: It's too bad Rick got a claim after he retired. But that probably won't happen to me. How likely am I to get a claim after I stop inspecting? Do I really need tail coverage?

While ERP (post-inspection) claims are less common than claims during active coverage, they still happen. Based on our experience, most occur within the first two years after the initial inspection.

Still, claims can arise at any time, especially in states with longer statutes of limitations. And getting even one claim during retirement or a career change can be devastating, possibly resulting in tens of thousands of dollars in legal defense and settlement costs without proper insurance. That’s why tail coverage (an ERP) is important for every inspector’s retirement plan.

How much does an ERP endorsement cost?

How much tail coverage costs depends on how much you buy. Most insurance providers offer one to five years of tail for 100 to 300 percent of the annual premium of your last policy.

Let’s say your current policy costs $1,500 per year and you want three years of tail coverage. If your provider charges 300 percent of your annual premium for three years of tail, then you’ll owe $4,500 for your ERP endorsement.

Bear in mind that you can rarely finance an ERP; you have to pay the full cost upfront. And you can’t add more later.

For example, say you buy those three years of tail coverage. Then, you get a claim a year after you retire. That makes you think you may want five years of tail instead of three. But it’s too late. If you want more, you have to buy it upfront–not in the middle of your extended reporting period.

If you’re worried about having a big financial burden without the opportunity to finance, there’s good news: As an ASHI member, you enjoy five free years of tail coverage exclusively through  InspectorPro with the ASHI Advantage. That’s an average of $6,000 in savings.

In addition to safeguarding your retirement, the ASHI Advantage’s free ERP endorsement also protects your family from claims against your business for up to 10 years in the event of your passing (other than by suicide or criminal acts). That’s a lot of peace of mind for grieving family members.

To qualify for free tail coverage through the ASHI Advantage, members must:

1. Carry insurance with InspectorPro for three or more consecutive policy periods (at least 36 months) prior to retiring.
2. Write us to opt in no later than 60 days after their policy’s expiration or cancellation.
3. Not be subject to any disciplinary proceedings regarding their inspection services.

Free Tail: A Solid Exit Strategy

Like Rick, you may be done inspecting. But there’s no guarantee that claims are done with you.

Leave your inspection business with confidence by purchasing an extended reporting period. And if you’re an ASHI member, save thousands of dollars by opting into the ASHI Advantage with all of its benefits—including free tail.