“You don’t have to be a millionaire to be sued like one.” – Your local ambulance chaser
Many of us have probably heard this saying, and its mostly true. As long as somebody has enough evidence to sue you they technically can. One great way to avoid a lawsuit is by making sure you have adequate liability insurance on your home and auto.
Liability insurance reimburses others for the damages and injuries you are found responsible for. Unfortunately you might not be carrying enough liability insurance to cover yourself. Here are the factors a court might consider in figuring out how much you can be sued for:
1.) Income. Did you know a court can potentially garnish your wages? This means they can take a portion of your paycheck before you receive it. Some cases have awarded up to 25% of a persons income, for up to ten years.
example: Joe earns $50,000/year x 25% x 10 years = $125,000
Malique earns $35,000 x 25% x 10 years = $87,500
2.) Real Estate. If you own a home, even if it’s your primary residence, you could be forced to sell it. The equity can be applied towards damages, fees, etc.
example: home price $200,000 – $170,000 owed = $30,000 equity
3.) Automobiles. Did you know your primary vehicle can be seized? Courts seem to think the bus is an acceptable form of transportation.
example: car value $20,000 – $8,000 still owed = $12,000 auto equity
4.) Personal belongings. Yep, you could be forced to sell your belongings to contribute towards the settlement amount.
Example: estate sale $40,000
5.) Investments. Did you know a court can even award future garnishment of investments including 401K, Roth IRA, and even Social Security.
Example: $30,000 401K + $80,000 Social Security = $110,000
Total potential exposure in this example:
$125,000 + $87,500 + $30,000 + $12,000 + $40,000 + $110,000 = $404,500
What if we fell asleep behind the wheel, or have a heart attack while driving, and end up careening into oncoming traffic and kill somebody? What if their case is worth $800,000? The good news is they can only get as much money out of you as you’re worth, the bad news, as you can see, is they might take everything you have in the process. How can insurance protect us then?
Two simple steps I recommend:
1.) Make sure you have enough liability protection on your home and autos to cover you (I recommend carrying at least $500,000 on each policy)
2.) Evaluate the cost for an Umbrella policy as this can be a hugely affordable option to get you adequate coverage for a more reasonable price
Now go meet with your insurance agent for a policy review and see how your current policies are measuring up!
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