You’ve worked hard to build a successful business and have built up some significant personal assets. You were smart enough to sell stocks before the recent stock market downturn so you have a fair amount of cash built up. You own a few pieces of real estate.  One night your 18 year old son is driving his car and causes an accident. The driver of the other car is seriously injured and may require medical care for the rest of his life. The car is owned by you and insured in your name. The amount of insurance will not cover the other driver’s damages. A personal injury lawyer files a lawsuit on the other driver’s behalf and tells you they will be seeking payment beyond the insurance limits.

FIrst, let me say that if this scenario occurs to you the time for asset protection has likely passed. Making adjustments after the fact may raise red flags and could subject you to liability for fraudulent conveyances. You must protect your assets in advance. Unfortunately asset protection is often overlooked.

One of the easiest ways add a layer of protection in this scenario is to have umbrella insurance coverage. Look at obtaining the most expensive coverage you can reasonably afford. One million dollars ($1,000,000) in umbrella coverage is usually under $200.00 or less per year, plus some added expense for increased coverage on your vehicle. However, I say you should consider buying a larger policy. You might be surprised to learn to that five million dollars ($5,000,000) in umbrella coverage will not cost you substantially more while the protection is FIVE times as much.

But remember that not all umbrella policies are the same. They differ in coverage, definitions, scope and features. Some umbrella coverages may have exclusions that do not provide coverage in connection with  a business, occupation, trade or profession. Therefore, It is  good idea to read the policy carefully to understand what is covered and what is not. Sometimes business owners automatically assume they are covered for all situations with their umbrella policies. That is not always the case and you may end up with business owners that have the false sense they are covered. Generally, umbrella policies will cover you for personal situations only.

Another consideration in the scenario I outlined is whether the child should own the car and maintain all insurance coverage. Naturally the cost of insuring the vehicle is substantially higher if you place the insurance coverage in the name of your teenage son. But the the increased cost may not be nearly as great as the potential loss of assets. If you are able to afford it, consider placing ownership and all insurance coverage in the name of your child if the child is the primary driver of the car. This could help protect your assets from damages caused by your child. While you are sure to complain about the costs when you pay for the insurance, you will be very happy if the scenario I described ever happens to you.