Your Insurance Company
Re: Auto Accident on Jan 1, 2011
Dear Valued Client:
You are being sued by Mr. John Contractor, the injured party of the above referenced accident, for $700,000. Per your insurance limits, Your Insurance Company will cover the defense costs for $300,000 in liability. You will be responsible for your own defense costs beyond that amount, as well as the remaining judgment.
We highly recommend you seek legal guidance for the part of the lawsuit not covered by our policy.
Thank you for your business,
Your Insurance Company
Don’t think you could ever be the Valued Client in this letter? Besides causing the accident, let’s consider just what makes you a likely candidate of a lawsuit.
Two major factors are: WHO is the injured party, and HOW MUCH are the damages.
In the case of the above auto accident, Mr. John Contractor is a full time employee of ABC Contracting and makes $70k a year. Due to the accident, he has a broken leg and will not be able to work. It just so happens, that he does not want to pay the medical bill and physical therapy bill for the accident that you caused. He’d also like to continue to pay his mortgage and the quality of life he had before the accident. So, would you be so kind as to pay the 10 months of lost wages he is due. Mr. Contractor’s $300/hour lawyer would also like to see a little extra for his client’s pain and suffering. Oh, yes, as well as payment for his bill.
Note: Although your automobile is regularly viewed as the greatest source of liability, your home, rental property, boat, and even your computer can bring about a lawsuit.
Another factor that makes you a great candidate for a lawsuit is your CURRENT financial status. The size of your current income or assets will affect the likelihood you getting sued. Your net worth or even PERCEIVED net worth can become a target.
The last factor we will mention is your FUTURE financial status. I often hear people say, “No one would sue me. I don’t have any money.” That may be true, but courts do not just look to your checking account. If there is a large and rightful financial judgment filed against you today, it will wait for your financial situation to improve. Maybe you will receive a modest inheritance, or graduate from engineering school. Congratulations, a lump sum or payment plan will be sufficient.
Great, what’s a suable person to do? First, carry higher liability limits on your primary insurance policies like your home, renters, auto, and boat. A typical home or auto policy will have a max limit of 500k in liability, and that’s just not enough. Second, buy an umbrella policy! Umbrella policies are excess liability coverage in addition to your primary insurance policies. Furthermore, some umbrella policies can fill coverage gaps that are not covered by your individual primary policies. An example would be liable, or slander. The best part is that they are very inexpensive and get incrementally less expensive with increased coverage. For example:
The first 1 Million in coverage will typically range from $150 to $250 PER YEAR.
The second million dollars in coverage will range from $75 to $100 PER YEAR.
The third and subsequent increases will be around $50 each PER YEAR.
The bottom line is: If you’re not perfect, an umbrella policy is going to give you added peace of mind. No one has ever been bankrupted by $150, but I’ve certainly witnessed it by $1M.
Call us today to discuss your individual needs. 512-828-7010.
Carroll & Delaune Insurance Services, Inc
