Unexpected Lawsuits & the Benefits of Umbrella Policies
Life is treating you well. You own a house, a vacation condo, two cars, a retirement fund and some money put away for the kid’s college fund – then crash! You are involved in a motor vehicle accident – and it was your fault. A few months later you get served with a summons and complaint. The person you were involved in the accident with was seriously injured and they are now suing you.
You take the complaint to your insurance company. Their lawyer contacts you and they say that the company has hired their firm to defend you, but also tells you that the value (yes, that’s how personal injury lawyers describe bodily injuries) of the plaintiff’s injuries far exceed your maximum limit insurance policy of $250,000. What can you do? All those assets you worked hard for are now in jeopardy.
It is not so much what you can do NOW, it’s what you could’ve and should’ve done – and that is – insure yourself with a million dollar (or more) umbrella policy. These policies are usually offered as additional protection against suits claiming negligence by your home insurance or auto policy carrier.
If you had such a policy, you would’ve had this comforting additional coverage. With medical costs soaring and people’s incomes growing with inflation, it’s not unusual for damages for medical expenses, pain and suffering, and lost income to exceed a million dollars. After the $250,000 auto policy coverage, the umbrella would cover you in lawsuits as herein described or for general negligence, such as your neighbor tripping over the rake you left out overnight on the sidewalk.
But you don’t have that umbrella policy, so what can they “take” from you if the plaintiff obtains a million dollar judgment? Thankfully, any designated retirement funds (401k, IRA, employee pensions) are exempt in a chapter 7 bankruptcy. Similarly, depending on the state you live in (Florida and Texas exempt your homestead), a portion of your principal residence would be exempt if you file for bankruptcy as a result of the judgment against you. But the condo, other funds set aside, and except for a small exemption for one car, pretty much everything else is up for grabs! Pretty sobering.
Don’t get caught without an umbrella…policy that is!
Contact experienced attorney James Misiano at 631-396-0255 if you encounter a surprise lawsuit, or better yet, let him advise you ahead of time to protect your assets!