If you live in Colorado and watch TV or listen to the radio, chances are you have seen or heard a commercial from a personal injury attorney. These are the commercials that talk about hiring a lawyer if you were in a car accident, and frequently give examples of how much they got for their clients: “I called (name of law firm) and they got me $700,000!” Since those commercials seem to be on every 10-15 minutes, if you get in an accident and you are deemed at-fault, there is a strong chance you will find yourself in a legal battle.
The fact of the matter is, there are many people out there that see a big payday if they get in an accident. Rather than simply wanting to have their medical bills paid for and their vehicle fixed, which is what insurance is meant for, often times the injured party wants to be able to pocket some cash at the end of the ordeal.
One thing the commercials don’t mention is that the insurance company is only going to pay out up to the liability limits on the policy. If your liability limits have been exhausted, they will come after you to pay the rest. It is scary to think about, but if you are in an accident and you get sued, they can take your home or garnish your wages until the judgement has been settled. The good news is that there are some things you can do to ensure you have the best protection for your family and your financial future.
How can you protect your financial future?
- Make sure you have adequate liability coverage on your Auto and other vehicle insurance like Motorcycle, RV, Boat, ATV, etc.
The easiest way to protect your assets is to ensure you have enough liability coverage, since that is the maximum amount an insurance company will pay out if you are found liable. Many agents will sacrifice your coverage in order to save a minimal amount of premium, which may save you a few dollars a month, but could cost you significantly more in the future.
In Colorado, the minimum liability limits you can have on an auto policy are $25,000 per person/ $50,000 per accident for bodily injury, and $15,000 per accident for property damage. That means that if you were at-fault in an accident and you had state minimum limits, the most your insurance company will pay is up to $25,000 for each person you injured in the other vehicle(s), but the maximum they will pay for injuries for the entire accident is $50,000. For example, if 3 people were in the other vehicle and they each had $25,000 in medical bills from the accident, the total injuries would be $75,000. Since the policy limit per accident for injuries is only $50,000, you would be on the hook for the remaining $25,000.
At Integrity First Insurance, we make it a priority to not write policies with the state minimum limits. Frankly, it is not enough coverage and we would be doing you a disservice if we wrote a policy with those limits. We generally recommend a minimum of $100,000 per person/ $300,000 per accident, and $100,000 for property damage, with the goal of eventually increasing to higher limits and getting an Umbrella Policy, which I will explain later. Ideally, we would like to write all auto policies with $250,000 per person/ $500,000 per accident, and $100,000 for property damage, as that is the highest limit most insurance carriers offer and provides the best protection for your family and your assets.
Even if you are a cautious driver and you have never had an accident, there are things that are out of your control that can cause you to be at-fault in an accident. It is important to be a safe driver, but also to plan for the unexpected.
Here is just one example of a claim that I have seen first hand while working in the insurance industry:
A client was driving on I-70 and their tire suddenly blew out, causing the vehicle to swerve to the right and sideswipe the vehicle in the lane next to them. That caused a chain reaction and in a matter of seconds there were 5 vehicles involved in the accident. Even though our client didn’t do anything wrong, he was still considered at-fault since his vehicle caused the chain reaction and therefore caused the damage to the other vehicles and the injuries to the other drivers.
- Make sure you have adequate liability insurance on your property insurance like Homeowners, Renters, Condo, Rental Properties.
Most property policies include personal liability coverage, which can extend for many different situations. The most common situation in which your personal liability coverage comes in to play is if someone gets hurt on your property, although it can also extend for things like if your dog bites someone or if you damage someone’s property. One of the benefits of personal liability coverage is that it extends to all members of your household for their actions anywhere in the world, not just on your property.
Something to keep in mind is that when your kids go away to college, they can still be considered a member of your household and your personal liability coverage can still extend to them. One of my coworkers had a pretty scary incident when he was in college. He was on the soccer team and they had a gathering with some other members of the team. They did not provide alcohol and they were not drinking since they had practice the next day. A teammate’s friend showed up and had clearly been drinking before he got there but he only stayed for about an hour and did not drink on their property. He went back to his dorm room and went to bed on the top bunk. The next day his roommate found him face down on the floor, he had fallen off the top bunk and hit his head. They later found out that he was brain-dead, and his family tried to sue the kids that hosted the gathering. At the end of the day, they were able to get the case thrown out since they did not provide the alcohol and he was not drinking on their property, but had the case proceeded, my coworker’s parent’s homeowners policy would have extended liability coverage and would have covered the court costs for the legal defense.
Personal liability coverage will help protect you and your family financially by covering the legal costs and potentially a judgement against you, up to the limit on your policy. While the minimum amount of personal liability insurance offered by most carriers is $100,000, we always try write policies with a minimum of $500,000 of personal liability coverage. The price difference is minimal, generally only a few dollars a month, and if you are being sued it provides a lot more peace of mind to know that you have $500,000 to protect you and to fight a legal battle.
Here are some situations in which your personal liability coverage could extend:
- You have people over and someone trips over an uneven step and injures themselves.
- You throw a party and a guest drives home after drinking and gets into an accident, injuring others or damaging property.
- You are at the dog park and your fur baby bites another dog or a person, resulting in medical or vet bills.
- Your kids are playing baseball at a park and a baseball they hit breaks the window of a home next to the park.
- You are smoking outside and don’t fully put out your cigarette, which causes a fire and damages the condo/apartments around yours.
- You are skiing or snowboarding and a kid turns in front of you and causes you to collide with them and cause injuries.
- Last, but certainly not least, purchase an Umbrella Policy.
As I previously mentioned, your insurance company will only pay out up to the limit of liability you have on your policy. Luckily, if you have an Umbrella Policy you can have up to an additional $1 Million to $5 Million in liability coverage in case your underlying policy limits have been exhausted. An Umbrella Policy blankets all of your underlying policies, including vehicle or property policies. If the underlying policy limits are exhausted and the legal issues have not been settled, the Umbrella Policy will kick in to pay for the legal fees and judgements against you.
An Umbrella Policy is beneficial to anyone at risk of being sued—basically, anyone with assets to protect. The fact is, it only takes one serious accident and a resulting lawsuit to put everything you own and your future earnings at risk. The more vehicles and properties you own, the more liability exposure you have. When determining what limit you want for an Umbrella Policy, consider the amount of exposure your household has, the amount of assets you have, and how much your future earnings could be.
Most insurance carriers that offer umbrella policies require that you have at least some of your underlying policies written with them, particularly the auto policy, although there are a select few carriers that will write a standalone Umbrella Policy. There are also requirements regarding how much liability coverage you need to maintain on your underlying policies in order to qualify for an Umbrella Policy. In general, you are required to have $250,000 per person/ $500,000 per accident/ $100,000 for property damage for any vehicle policies, and at least $300,000 for liability coverage on any property policies.
There are some situations in which an Umbrella Policy may extend coverage even if you do not have an underlying policy, like if you borrow a friend’s snowmobile or you rent a boat or jet ski while on vacation and injure someone or damage property. In those situations, since you do not own the snowmobile or boat, you don’t need to have insurance on it, but your umbrella can still extend to cover any damages you are found liable for.
The cost for an Umbrella Policy will vary based on the amount of risk in your household. Some factors will include the number of vehicles, the age and driving history of the drivers in the household, and the number of properties you own. For an average risk, an Umbrella Policy can cost as little as $300/year for an additional $1 million of liability coverage.
These are some examples of claims actually filed against an Umbrella Policy:
- A 28-year old engineer dove into a friend’s above ground swimming pool, struck his head on the bottom and as a result, became a quadriplegic. He sued both the homeowner and the pool manufacturer. The court found the homeowner to be 60 percent responsible and the pool manufacturer to be 40 percent responsible, and awarded $10,000,000.
- The insured’s tenant claims she became ill from carbon monoxide poisoning resulting from a faulty furnace. The tenant claimed permanent brain damage and demanded $750,000.
- A babysitter left a 5 month old infant unattended in a walker. The infant toppled the walker, struck her head on the floor and suffered brain damage. The parents of the infant sued the teenage babysitter and her parents. The court awarded the infant’s parents $11,000,000.
In today’s society, you can be sued for nearly anything and all of the personal injury attorney commercials have made Colorado an especially litigious state. You may think that nothing that bad is going to happen to you, and honestly you may be right, but I can assure you that nearly everyone who has been involved in a catastrophic liability lawsuit thought the same thing before it happened to them.
Rather than hoping for the best or living in fear of a lawsuit, the best thing you can do to prepare is to ensure you have enough liability coverage to protect your family. As long as you have the protection you need, you can live your life to the fullest and rest assured that your insurance will go to battle for you if a lawsuit arises.
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