insurance question

 Ladies and Gents,

My insurance company (who always seems to want to sell me MORE) contacted
me suggesting that our automobile liability coverage is lower than the
value of our house (house is about $800K).  She suggests that our liability
should be AT LEAST as much as the value of our house because if someone
sues us for an auto accident, they could put a lean against the house.

It sounds logical. Years ago, I heard that if someone sues you because of
an auto accident, their lawyers usually go for the easy money which is the
amount of liability insurance you have on your car.

If this does turn out to be advisable, I intend to go out for quotes before
changing my coverage.

Thanks,
Jim
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The word you're looking for is lien, but the problem you're talking about
would be a judgment against you that would be satisfied by forcing a sale
of your house.

You might want to look into an umbrella liability policy that covers you
for any negligence on your part, including bad driving.

You say "our house," by which I assume you mean you and your spouse.  If
your state allows it, you might want to look into titling your house as
tenants of the entirety.  This is a legal fiction that means that each of
you owns 100% of the house, which in turn means that the house may not be
used to satisfy a judgment against just one of you.

If you own a house worth $800K, you might want to talk to a financial
advisor or a lawyer about asset protection.  It might cost a couple of
hundred dollars, but disinterested advice might be preferable.  By
disinterested I mean that the advisors won't be trying to sell you
something other than their expertise.

Just suggestions.

*** I am not a lawyer, so this can't be legal advice. ***
*** I am not a certified financial planner, so this can't be financial
advice. ***


<snip>

 Not true in New York:
http://www.assetprotectionbook.com/NY_Sweeney-Kane_2004.htm

Here's an outline of major TBE issues:
http://www.ilnb.uscourts.gov/JudgeWedoff/Opinions/TBEoutline.pdf


Le 27/7/07 08:32, dans Gchqi.31643$C96.31161@newssvr23.news.prodigy.net,

 

How much equity do you have in it?  They can only get what you own,
not the part the bank owns.   I don't think that is much consolation,
though.


I think this might be a good idea, to have more insurance if you have
more assets, but that is because you can probably afford more
insurance, not because of the reason he gives.

I don't agree with any of the harsh stuff Richard says, but I don't
think there is any real relationship between how much insurance you
need and the value of your house.

If they win in court and it's more than your car insurance, including
any umbrella policy, they're going to put a lien on your house no
matter how much or little your house is worth.  Even if your house is
worth 20,000 dollars, isn't that reason enough to pursue that part of
the collections?   They can get their 20 thousand minus expenses for
just a few hours more work.   I say this theoretically.  Maybe someone
with experience can tell me otherwise.


But he is a dead rat, so his advice might be rational.

You may have a lot of money, and that is a good thing, but in one way
you need more insurance if you want to keep your money.  In another
way, anyone with any money needs the same amount of insurance.  Say I
have assets of 50,000 dollars and insurance of 50,000 and I do 5
million dollars worth of damage.  They take my insurance and my 50,000
and which is all that I have and they can pursue me for maybe 20 more
years to get more.  Say you have 2 million dollars of assets and a
million dollars of insurance and you do 5 million dollars of damage.
They take youri insurance and your 2 million and can pursue you for
maybe 20 more years too.

Of course it's very unlikely that either of us will do 5 million
dollars of damage.

SAy we each do 500,000 damage, according to what the judge or jury
awards, but this time you only have 300,000 in insurance.

So they take the same from me that they did in the first case, and
they take "only" 300,000 from your insurance, and they then get
200,000 from your house.  You probably won't have to sell.  You'll
just get a mortgage to pay the 200G.  But it will still hurt.

Who will it hurt more, me for losing everytyhing I have but I only
have 50,000, or you for losing 200G when you still have more left.  I
think it will hurt both of us the same, roughly, but in different
ways.


 

 
I'm not a lawyer, but I don't think that is accurate. No one will
"put a lien on your house".

The law makes a distinction between secured and unsecured debt.

** A secured debt is a debt that is backed by a specific asset: if
you don't pay, the creditor can seize the asset and sell it. (If the
proceeds don't cover the debt, you still owe the remaining balance.)
Typical secured debts are car loans and home mortgages.

** An unsecured debt is money that you owe but is not tied to any
specific asset. Typical unsecured debts are credit-card balances. If
you buy a big-screen TV or even a car with your Visa card, and you
don't pay it, Visa cannot repossess what you bought.

Now, court judgments are like unsecured debts. If you lose a
liability case, there will not be a "lien on your house" as several
people have posted. In other words, it functions the same as a court
judgment over an unsecured debt. You have to pay out of your general
assets, and how you pay is up to you. If you don't or can't pay,
there are supplemental proceedings. The judge can order specific
assets sold or ultimately you can be forced into bankruptcy. But in
bankruptcy your primary residence is usually protected.

How much liability insurance do you need? The answer isn't simple,
but is a blend of how large your assets are (so you won't be forced
into bankruptcy) and what size judgments are typical. You can't
protect against a worst-case scenario because that's essentially
infinite. So you protect against maybe the 90th or 95th percentile.
As I've already posted, the marginal cost of coverage goes down as
the policy limit rises. For example, if you raise your deductible
from $250 to $500, you can probably buy many thousands in additional
coverage with the saving in premium.

--
"The internet is famously powered by the twin engines of
bitterness and contempt."   -- Nathan Rabin, /The Onion/
Stan Brown, Oak Road Systems, Tompkins County, New York, USA
                                  http://OakRoadSystems.com/