Imagine that you have an accident on the road, and another driver or their passengers are injured. You might believe that your auto insurance policy protects you from all possible ramifications of this incident. However, your policy imposes certain limits on payouts for damages. What if the injured party decides to sue you, personally, for damages not covered by your auto insurance policy?
It happens all the time, especially where wealthier people are concerned. Whether or not the court ultimately rules in your favor, you will be subject to attorney’s fees and an expensive legal battle. If the court does rule against you, the judgement could cause irreparable financial harm.
We’re not trying to scare you, but remind you of a scenario that happens quite frequently within our civil court system. It’s also a potential danger to your future financial health.
An umbrella insurance policy is designed to protect against these situations. The policies, sold in million-dollar increments, are considered a staple for most higher-income individuals.
Since umbrella insurance tends to be ridiculously inexpensive compared to its benefits, almost anyone could afford it, but the people who need it most are those who earn a high income and have visible assets. You drive nice cars, you enjoy weekends at your vacation home, everyone admires your new boat, and so forth. Often we don’t realize that symbols of hard work and success look like a bullseye target to the less scrupulous.
And that’s not to say that all lawsuits are motivated by unscrupulous sorts. Legitimate accidents can occur, whether on the road or at home, and sometimes a court judgement is absolutely warranted. The difference is, many injured parties won’t spend the time and money to pursue a lawsuit, if they know they don’t have much to gain.
If you own considerable assets, and particularly if that fact is well known (as it usually is), it’s time to consider whether those assets are adequately protected. Call us for a consultation and we can help you evaluate your overall financial strategy, as well as the protections you need to put in place.