Is Your Liability Insurance Enough?
Liability insurance is important, but liability insurance can’t replace the other ways to protect yourself. Liability insurance insures only one in three lawsuits, so most lawsuits aren’t even covered. The possibilities of an uninsured claim are endless. How good is your million-dollar liability policy if you’re sued for two million? And with today’s unpredictable, ludicrous jury awards, who can be certain they won’t be hit with an excessive judgment? You will have to hire your own lawyer to defend yourself against your potential excess liability and even then you could still lose your assets to policy exclusions or loopholes.
A good plaintiff’s lawyer can manipulate a jury to make an outlandish award far beyond your policy limits. Common lawsuits include breach of contract, a defaulted loan, family disputes, and many others.
The truth is you just can’t predict what you can lose once you are sued. Years ago, we could predict with reasonable accuracy the outcome of a lawsuit. Juries were sane. Judges cut excessive awards. Punitive damage claims that awarded a plaintiff millions of dollars for no damages were unheard of. But that was when courts compensated actual losses. Today’s reality is very different. Courtrooms now redistribute wealth, so you can’t be confident that your million-dollar policy is enough. No matter how much liability insurance you carry, some litigant will sue you for more.
So how much liability insurance is enough? That’s a tough question to answer. If insurance were free, we would say to buy as much as you can. But insurance isn’t free, and often the more you buy the more you pay. You must find a balance with the cost of increased coverage against the risks from less coverage. You must not only consider the probability of an excess judgment against you but also what you could lose if you did face a judgment beyond your policy limits.
Since you can never buy enough coverage to insulate yourself against today’s insatiable litigation demands, your best solution is to also protect yourself by means other than insurance which is why Asset Protection makes a great compliment.