Carrying the right amount of insurance can protect your assets

A friend was in a car crash recently where he was at fault. He now is concerned about being sued and losing his home.

Do you have any advice on how much car insurance people should carry, or what else can be done so a person doesn't find themselves in such a dire situation?

MB: This advice will come too late to help your friend, however, the following is some general advice that may help others (this only applies to bodily injury liability and does not address property damage liability, collision and comprehensive coverage, under-insured and uninsured coverage, personal injury protection or medical payments coverage).

How much insurance coverage you need depends on the assets that you need to protect. When deciding the amount of bodily injury coverage you must carefully review your net worth and determine whether or not your assets would be protected from creditors.

For example, if you own your home, have investments that are not protected from creditors and make in the range of $80,000 or more per year you should have at least $100,000/$300,000. This coverage provides up to $100,000 per person per accident and no more than $300,000 per accident.

If you have substantial assets, you should have even more insurance and an umbrella policy, which typically only costs only $150 to $300 per year but provides $1,000,000 in coverage for bodily injury you may have caused.

If you rent your home or apartment, make in the range of $35,000 per year and have no assets, a $50,000/$100,000 policy should be sufficient.

Many insurance companies have Net Worth Calculators on their Web sites to help determine your worth and, therefore, the amount of insurance that is appropriate for you and your family. The best way to assess your insurance needs is to meet with a qualified insurance professional and have them review your assets to develop a comprehensive insurance program. This will ensure that you purchase not only the appropriate amount of insurance but the correct types of coverage.

Melanie Beauchamp is a litigator whose practice is focused on the areas of criminal defense, personal injury and civil litigation. If you have a question you would like answered in a future column, send an e-mail to kristina@beauchamplawoffice.com.