Liability Insurance and Asset Protection

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Insurance is the number one choice when it comes to protecting your personal wealth and business assets. Insurance can be a valuable tool in protecting your assets. Insurance can not only be required by law by your lender or your landlord but it can also serve as a first line defense against potential liability lawsuits. To fully protect your assets, you need to know what insurance is, and what it does or does not do.

Three main categories of coverage are included in most insurance policies, including auto, homeowner, landlord, and business.

  1. Liability coverage is coverage that compensates the other party for bodily injuries or property damage. Your liability coverage will cover the cost of repairs and injuries to the car and other drivers if you cause an accident.
  2. Property coverage This is coverage that covers your property in the event of an accidental or sudden loss or damage. After you have paid your deductible, your property protection coverage will cover the cost of replacing or repairing your vehicle if it is damaged in an accident.
  3. Additional protection This is a broad range of coverages that will help you get by while your vehicle is being repaired. It includes rental cars for when your car is out of service, as well as miscellaneous coverages such as towing and medical costs for you and your passengers.
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Liability insurance provides protection against legal action and the loss of assets. It does have some limitations.

  • There are limits to how much insurance policy will pay for losses you are responsible. The maximum the insurance policy will pay for losses you are liable is $100,000. Guess who will pay the $250,000 remaining? That’s right: you! Either you will need to have the cash, or your home and/or assets could be lost.
  • Your insurance policy may contain exclusions. Excluding liability for intentional or criminal acts is one example. Sexual harassment, discrimination in employment and wrongful termination are all generally excluded. Discharge of toxic substances and waste is usually excluded. Most liabilities arising out of breaches of contracts or agreements will not be covered. Unless a separate professional liability policy exists, professional liabilities like malpractice, errors, and omissions will usually be excluded. The insurance company will attempt to avoid paying a large liability claim. You are likely to be on your own unless the insurance policy covers it. The insurance company can also avoid paying claims if you fail to disclose any material facts or report any material changes after your policy has been in force.
  • Many other ways that you could be sued are not covered by insurance policies. You could be sued for fraud or allegation fraud, misappropriation or fraud, breach or contract, slander or libel. These risks are not covered by liability insurance. These risks are not usually covered by insurance.
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It is clear that all of us should have the insurance required by law (the lender or landlord) as our first line of defense against lawsuits. There are limitations on the amount of insurance that will cover you and many other situations in which insurance won’t provide coverage. You cannot rely on insurance alone to protect your assets.

Many times, simply having all of your assets available to an aggressive injury lawyer invites lawsuits that may not otherwise be filed. It is impossible to prevent a lawsuit from arising if you make the injury attorney believe that there will not be any assets or money available to him after he has spent all his time to go to trial, even if he wins.