Many of my clients are aware of the fact that their children’s activities with the family car and other family property exposes them to liability.
However, I would guess that many people don’t think about the consequences of letting a friend outside the household borrow their car (or boat etc). A recent example:
A friend borrowed a car from his friend because he had just sold his own car. He proceeded to get into an accident that involved multiple cars. His friend wasn’t thinking of liability when she tent the car but after the accident she did. The problem was, in between cars, he was not insured.
When the accident victims called their claims in, of course the friend wasn’t happy. The fellow who borrowed the car agreed to cover any deductibles and such but the real risk in situations like this is extensive property liability and extensive personal injury liability. Normally, if for example, you borrow someone’s car and get into an accident which was your fault, your insurance would apply first. And then if your insurance were not enough for the claims, theoretically the plaintiff could go after the insurance on the car you borrowed (like a friend).
However, if you have no insurance it could go straight to your friend’s insurance. And if your friend’s liability coverage is low and the accident is serious, watch out.
Oh you may think that’s not possible – but where would the money come from? In our legal system, someone often has to be “at fault,” and typically that someone is whoever has the money to pay!
So what should you be thinking about? Here is a short list but not exhaustive list of questions to go over:
- what are your current liability (injury and property) limits on your auto, homeowner, general liability, boat, RV, ATV etc insurance policies?
- who uses your cars, boats etc?
- who outside your family borrows your equipment? Are they insured?
- does your insurance company have limits or exclusions that you are violating?
- do you borrow a car or other equipment from someone who is not well insured?
Again this is not an exhaustive list but a starter list to help ensure your net worth is protected. Asset protection is sometimes over looked but shouldn’t be. Consider taking this list with answers to a qualified insurance/risk specialist. This specialist should ideally be working as part of a comprehensive financial planning team that can help coordinate asset protection into an overall plan.
If risk management is important to you, and you are looking for a good fit, feel free to give us a call. We have very good risk management people who work as part of our collaborative team to help people protect assets as part of their financial plan. If you’d like to learn more, call us at 781.393.0021 or drop us a note with your questions using our contact form.
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