Family Health Legal Library

Children at College Issues

Claims In Excess Of Insurance Coverage

The most terrifying area of liability for a person who has become established and has been able to accumulate a certain amount of assets is the area of claims in excess of your insurance. Assume a situation where you have taken the lowest limits of insurance coverage for your state, say $25,000. In an accident, you injured the driver of another car, who became paralyzed in their left arm. Due to the future rehabilitation, pain and suffering and the value of the loss of the limb, the person might easily recover $350,000 if the case went to a jury trial. Who pays the other $325,000? Assuming you have a house, a retirement fund and some other personal property, the answer is, most likely you do.

In some states, you may be protected from having a person who obtained a $350,000 judgment execute on this judgment and make you sell your house. But in many states, your wages can be garnished, and your house can be sold along with your other property.

Can you plan for prevention here? You bet. Protect yourself by making certain that your policy limits on your homeowners policy, as well as all of your insurance policies, have adequate coverage limits. In the above scenario, the person should have had policy limits of between $100,000 and $500,000 to be adequately protected.

Were you to accumulate more than a few assets, you might inquire about an umbrella policy, which may have limits as high as one or two million dollars. Such a policy is relatively cheap in most states, and would have easily protected the person in our above hypothetical example from financial ruin. So too, will higher coverage limits or an additional insurance policy such as an umbrella, protect you from liability for the acts of your student-child, if liability is found in your case.

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