Liability Insurance. Who cares?
Nobody, until one day you hear a scream from your yard. After running through the front door, you find your loving, wonderful, and maybe a bit overprotective dog hanging from the neighbors leg. Suddenly, liability insurance is the most important thing in your financial world.
Or, in a much more likely scenario, you’re driving through town 10 minutes late to a show. You adjust the rearview mirror and make sure you’re looking as fine as you should be. When your eyes hit the road again it’s too late. BAM… As you get out of your steaming car to see if everyone’s ok a billboard catches your eye. The face of an injury attorney stares down at you. “Have you been injured in an accident?” he bellows down. You realize the other driver sees the same sign and is pondering the answer to that question.
In both scenarios, you have officially entered the LIABILITY zone.
What happens next has everything to do with the people you hurt, your insurance policy, the insurance company, and the your insurance agent you partner with.
The mysteries of liability coverage will be uncovered for you one way or another, but here’s some info so you’ll understand now and be prepared.
Liability Insurance is the coverage in your insurance policy that’s available if you are responsible for damage to the property or bodies of others.
So how does it work?
Well, there are two ways that a liability claim can happen:
1. CLAIM MADE, CLAIM PAID
When something bad happens as a result of your actions, your home, or your family members, it stinks. Sometimes it’s such a small thing that no claim is made, and it’s just a good story to tell around the fire. If an insurance claim does have to be made, everyone wants it to go quickly and smoothly.
We experience these Claims Made Claims Paid scenarios all the time. Usually, it’s a fender bender. One person is at fault and their Auto Liability coverage is going to fix the other person’s car. No big deal, car goes to the shop, insurance company pays, everyone moves on with their lives. If injuries happen then the medical costs are taken care of up to the liability limits on your policy.
The more messy claim is a lawsuit. In this scenario, a lawyer is hired to pursue payment for damages. The good thing is that, almost every insurance company will use their own lawyers to defend you. You don’t have to hire lawyers or deal with any of the defense negotiations. Your job is the tell your story and let the insurance company take care of the rest.
Depending on the scenario, this process could take weeks or it could take years. But, if you have a good insurance agent, they’ll keep you informed throughout the process.
Would you be properly protected if you needed to use your liability insurance?
The first step in answering that question is in the DECLARATIONS PAGES of your home and auto policies. Look for your LIMITS OF LIABILITY in each. You should have at least $300,000 on each.
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