Category: Asset Protection
Tags: Business Entities, LLC, limited liability company, Insurance


Protect Assets: Liability or Malpractice Insurance May Not Be Enough

Posted on: June 26th, 2014

business asset protection

Liability Insurance May Not be Enough to Protect Assets

Having liability or malpractice insurance may be a requirement in some professions, and in other cases these policies are obtained on a voluntary basis. Depending on the line of work, liability insurance policies may be an expensive annual cost. Even though they minimize the risk of financial loss, in some cases, these policies are insufficient to fully pay a claim or judgment. Other asset protection tools may be more affordable and offer additional benefits.
 
Insurance policies have clearly defined limitations. The terms of the policy outline claim qualifications, coverage caps, and policies for entities typically do not cover general liability claims made directly against an individual owner of the entity. In the event that policies are insufficient, the policy holder’s assets are at stake. If no asset protection strategy is in place, business assets are not the only vulnerable assets. Personal financial accounts, real estate, and other property may be targeted to satisfy a judgment.
 
Some legal defense costs may not be covered by liability or malpractice insurance policies, which may be an additional burden on the policy holder.
 
Financial risks may be managed more completely through the use of business entities, trusts, and other asset preservation tools. These tools should not be used in lieu of insurance, but rather as part of a complete asset protection plan.
 
In the event of a liability claim, how do current laws protect your assets? Where are the vulnerabilities and what are the possible consequences? Review statutory protections with an asset protection attorney. For example, Limited Liability Companies (LLCs) in North Carolina are not as protected from the owners’ personal creditors as in some other states.
 
To maximize protections, business owners and professionals should implement asset preservation strategies for both their business assets and personal assets. A North Carolina asset protection attorney can explain the benefits of forming an LLC in North Carolina or another state and explore other ways of protecting business or personal assets. Proper planning can reduce business risk and offer more protection than any insurance policy alone could provide.
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