Being in an accident can be very costly, even with insurance. What if the damages from an accident are more than your insurance can cover? If you’re sued for more than your insurance, your savings, investments, home, and future earnings could be at risk. It’s important to know what might happen and how to protect yourself.
Key Takeaways
- Liability insurance coverage has policy limits that define the maximum payout, but serious accidents can exceed those limits.
- If sued for more than your insurance covers, your personal assets like savings, property, and future income may be seized to satisfy the judgment.
- Certain assets like a primary residence and retirement accounts may be protected by state laws, but many other possessions are vulnerable.
- Umbrella insurance policies can provide additional coverage beyond standard liability limits, offering an important layer of financial protection.
- Understanding the risks and taking proactive steps is crucial to safeguarding your finances in the event of a catastrophic lawsuit.
Introduction: The Risks of Being Sued Beyond Your Insurance Limits
As a vehicle owner, you might think your insurance covers you in accidents. But, your policy limits might not be enough. This could leave you with uncompensated losses and facing a personal injury lawsuit. You could even lose your assets if a court order is made against you.
For example, if you have $30,000 in liability coverage but the accident costs $110,000, you’re short $80,000. The injured person might sue you. They could win a court order to take money from your personal assets.
The court might take your wages or put a lien on your property. This could hurt your finances a lot. It could even lead to losing your assets. Knowing the risks of being sued beyond your insurance limits is key to protecting your money.
“Being an underinsured motorist can have serious consequences, not just for the victim but for the at-fault driver as well. It’s important to ensure you have adequate coverage to protect yourself and others on the road.”
What Happens If Someone Sues You for More Than Your Insurance Covers
Understanding Insurance Policy Limits
Auto insurance policies have limits on how much they’ll pay after an accident. In Nevada, the minimum coverage is “25/50/20”. This means $25,000 for each person hurt, $50,000 for all people hurt in one accident, and $20,000 for damage to property.
Potential Consequences of a Lawsuit Exceeding Coverage
If an accident’s costs are more than your insurance, the injured might sue you. A big court judgment could hurt your money. But, you can defend yourself by showing you can’t pay.
For instance, if you have $15,000 in coverage but the injuries cost $155,000, you’re on the hook for $140,000. The victim could sue you for that amount.
Lawsuits often happen for a few reasons. These include disagreements over who’s at fault, different views on settlement amounts, nearing the deadline to sue, or when insurance doesn’t cover enough. Understanding these risks can help you choose better insurance.
Collecting from the Defendant Personally
If the settlement award is more than your insurance, you might need to collect from the defendant. This could mean wage garnishment, liens on their property, and dealing with asset protection laws.
Wage Garnishment and Liens on Property
Wage garnishment is one way to get money from the defendant. The court can take a part of their wages and send it to you. They can also put liens on their property, like their home, to pay off the debt.
Protecting Certain Assets from Judgments
Not all of the defendant’s assets can be taken. Many states have exemption laws that protect things like their home. Retirement assets and some cash value in life insurance might also be safe.
| Asset Type | Exemption Status |
|---|---|
| Primary Residence | Typically Exempt |
| Retirement Accounts (ERISA-regulated) | Typically Exempt |
| Life Insurance Cash Value | Varies by State |
Knowing about exemption laws and asset protections is key. It helps protect the defendant’s money, especially for retirement assets and life insurance, after a judgment.
The Role of Umbrella Policies
Umbrella insurance policies add extra liability coverage to your regular insurance. They start at $1 million in coverage. This makes them a smart way to protect your assets and your family’s financial health.
These policies are great if you have a lot of wealth, own rental properties, or serve on charity boards. They’re also good if you have kids at home or own things that could cause accidents, like pools or trampolines. Umbrella insurance helps keep your savings and property safe from lawsuits.
Umbrella coverage works with your current insurance to give you more protection. It covers big risks like serious car accidents, dog bites, and libel claims. It’s a small price to pay for peace of mind and financial security, especially for those with a lot of assets.
FAQ
What happens if someone sues you for more than your insurance covers?
If someone sues you and wins a judgment that’s more than your insurance, you might have to pay the extra yourself. This could mean losing your home, savings, or future earnings to cover the debt.
How can liability coverage limits lead to personal liability?
Many people only have the minimum liability insurance required by law. But this might not be enough for big injuries or damage. If the damages are more than your insurance, the injured party can sue you for the rest.
What are the potential consequences of a lawsuit exceeding your coverage?
If a lawsuit judgment is more than your insurance, the court might take your personal assets. This could include your wages, bank accounts, or even your home. It can really hurt your finances.
How can you protect your assets if sued beyond your insurance coverage?
Some assets, like your main home and retirement funds, might be safe under state laws. You can also try to settle with the plaintiff or get an umbrella insurance policy for more coverage.
What is the role of umbrella insurance policies in excess liability coverage?
Umbrella insurance gives you extra liability coverage beyond your regular auto or homeowners insurance. It helps if you’re sued for more than your policy can cover. This way, you can avoid losing your personal assets.