|
HOW NOT TO PROTECT ASSETS
"I don’t need asset protection. I have liability insurance, plus an umbrella policy."
Insurance does not provide adequate asset protection.
First, a professionally designed asset protection plan discourages
lawsuits; insurance actually invites lawsuits.
Potential litigants are more likely to file lawsuits when they expect that
your insurance company will pay them a large judgment or settlement.
On the other hand, a potential litigant who learns that your assets are
protected and not available to satisfy a judgment will be discouraged from
filing the lawsuit.
Second,
insurance will only pay up to the policy limit. If that amount is
surpassed by a large judgment, your assets are at risk.
This is especially relevant with today’s trend of large liability awards,
increasing insurance premiums and decreasing insurance coverage.
Multi-million dollar liability judgments are commonplace today. To be
adequately insured against such excessive judgments, you must pay huge
premiums on a yearly basis. In contrast, you need only set up an asset
protection plan once.
Thereafter, you will be permanently protected, no matter how large the
judgment. Your annual insurance premiums can be reduced to a minimum.
Third, liability insurance will not protect against claims based upon
other grounds, e.g., I.R.S. assessments, fraud, intentional acts,
employment discrimination, sexual harassment, etc.
A professionally designed asset protection plan, on the other hand,
protects against all claims.
Finally, an asset protection plan will provide benefits such as tax
minimization and estate planning, which are not available from insurance.
We are often asked whether, based on the above, liability insurance should
be cancelled after an asset protection plan is implemented.
We advise clients who have protected their assets to continue to maintain
minimal liability insurance, thereby reducing their annual premiums.
A creditor or litigant who realizes that your assets are protected will
leave you alone and deal directly with your insurance company, usually
settling for the amount of the insurance coverage.
In addition, your conscience might be more comfortable knowing that if
someone is indeed harmed, he or she will receive some reasonable
compensation from the insurance company (not from you).
|
