Why Affluent People are More Prone to Being Sued

March 28, 2017

Why Affluent People are More Prone to Being Sued
Because affluent people basically have a lot to lose, they make attractive lawsuit targets for attorneys who represent injured parties. This is why it is extremely important for the affluent to consider their insurance very seriously. Nobody wants to lose their entire net worth and future wages because of a very bad incident. However, this risk must be addressed before an incident happens and before it is too late to get coverage. There is no legal way to pre-date a coverage change, and dealing with a shortfall of insurance is very unpleasant and a life altering experience.

What can Happen?
All one has to do is go to Google Scholar to view the thousands of cases that have judgements of more than a million dollars. Although the most common incident is an auto accident, lawsuits can arise from a myriad of circumstances ranging from swimming pool drownings to social media libel accusations and everything in between. Whether incidents are legitimate or not, people know that affluent people have money, and, because of this, they are good targets.

Is Bankruptcy a Way Out?
Bankruptcy is not for everyone. It is harder for affluent people to be discharged in bankruptcy, because courts do not grant bankruptcy to those whose assets exceed their debts. Asset movements can be traced, and hiding money is not a solution. Even if a wealthy person qualifies for bankruptcy due to a very large judgement, the person will still lose much of his or her assets, and the person's credit will be damaged for at least 7 years. Bankruptcy can also adversely impact a person's employment, especially if the person's employer can perform an employment credit check. Bankruptcy can also affect business owners, because it hinders their ability to get loans or reasonable interest rates. For such people, if bankruptcy is even an option, it is a very bad option.

When there is more at stake, attorneys will spend more time on a case. Attorneys in these cases often work for a contingency of about 30%. Consequently, they have a lot of skin in the game. They have a lot to go after, which includes your assets and your wages. They can wear you down until they get what they want or what they think the case is worth. They can emotionally drain you through this process. If they do not get what they want, they will file a lawsuit against you, which can put you in a difficult situation.

How to Protect with Insurance
Insurance effectively applies in serious incidents only if you have a lot of coverage, which means an umbrella policy that covers you above and beyond the amounts of coverage provided by your auto and homeowners liability policies. The more coverage you have, the more protection you have against losing your assets and having your wages garnished. Affluent people should carry at least 5 million dollars of umbrella insurance coverage, although a few insurance companies offer 50 million dollars of coverage or more for the very wealthy. There are no rules about how much coverage you should get, and getting only the amount of your net worth may not be enough, since injured parties can still come after you once your insurance company has paid its policy limits. It is wise to discuss coverage amounts with an attorney and your insurance agent. Nevertheless, it is necessary for affluent people to purchase an umbrella policy.

Legal Protection
The best part about an umbrella policy is the legal protection that you will receive from Insurance companies and their attorneys, who know how to manage these incidents. Actually, insurance companies on average spend significantly less than someone would on their own, simply because they have the experience and expertise to handle these claims. They will manage your case and will pay damages up to your policy limits. This takes a significant load off of everyone who has the misfortune of enduring this process.

Successful people have too much going on in their lives and too much to lose. This is why it is extremely important to address insurance issues as your finances change and not to wait for a serious incident to turn your life upside down.  

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