An accident can lead to serious injuries and significant financial losses. Most people rely on insurance to cover damages, but what happens if the costs exceed your policy limits? If someone sues you for more than your insurance covers, you could be personally responsible for the remaining amount. This can impact your wages, savings, and even assets like your home or car.
Understanding Insurance Policy Limits
Every insurance policy has a maximum payout limit. For example, if you have a $50,000 liability policy but cause an accident resulting in $100,000 in damages, your insurance will only cover up to the policy limit. The remaining $50,000 may still need to be paid by you personally.
Insurance policies typically cover:
- Bodily injury
- Property damage
- Legal fees (depending on the policy)
However, once the policy limit is reached, the insurance company is not responsible for covering additional costs. That financial burden shifts to you.
What Happens If the Damages Exceed Your Insurance?
If the injured party sues you for more than your insurance covers, they may attempt to collect the remaining balance from your personal assets. This could include:
- Bank accounts
- Real estate
- Wages (through wage garnishment)
- Personal property like jewelry or vehicles
If you do not have enough assets to cover the judgment, the injured party may work out a payment plan with you. However, court judgments can last for years and may impact your financial future.
Legal Defenses to Reduce Liability
If you are sued for more than your insurance covers, you may have legal options to reduce or eliminate the amount you owe. Some possible defenses include:
- Demonstrating Limited Financial Means: If you can prove you do not have the financial resources to pay the judgment, the injured party may accept a lower settlement amount.
- Comparative Negligence: If the injured party is partially at fault for the accident, their potential compensation may be reduced.
- Bankruptcy Consideration: In extreme cases, filing for bankruptcy may discharge some or all of your debt, though this has long-term financial consequences.
How to Protect Yourself from Large Lawsuits
There are ways to minimize the risk of being personally responsible for damages beyond your insurance limits:
- Increase Your Policy Limits – Higher coverage limits provide more protection in case of a serious accident.
- Consider an Umbrella Policy – This type of policy provides extra coverage beyond standard insurance limits.
- Review Your Assets – Keep certain assets protected under state exemption laws to reduce the risk of losing everything in a lawsuit.
What If You’re the Injured Party?
If you are the victim in an accident and the at-fault party’s insurance is not enough to cover your damages, you have options:
- File a claim under your underinsured motorist coverage (if available in your policy).
- Pursue compensation from additional liable parties (e.g., an employer if the at-fault driver was working at the time of the accident).
- Work with a personal injury attorney to explore legal strategies for securing full compensation.
Need Legal Guidance After an Accident?
Being sued for more than your insurance covers is a serious issue that can affect your financial stability. If you find yourself in this situation, legal representation can make a significant difference. A skilled attorney can help protect your assets and negotiate a fair outcome. If you are facing a lawsuit or need legal guidance after an accident, contact Friedman Injury Law at (702) 970-4222 for a free consultation.
