NEVER enough - Posted by Bill Bronchick
Posted by Bill Bronchick on March 18, 2005 at 12:00:40:
Insurance is good, have lots of it. But, let me give you a little insight about how the insurance industry works, since my first job out of law school was doing insurance litigation.
First, understand that insurance has limits. So, for example, if you have a $1,000,000 policy and you get sued for $2,000,000, you are SOL for the difference. These days is isn’t hard to convince a jury that a permanent injury is worth more than $1M. Forget the equity in the property - if you have personal assets, you’ll lose those, too.
Second, insurance has many EXCLUSIONS. Insurance companies are good at two things: collection premiums and denying claims. If they weren’t, they wouldn’t stay in business. The first thing an insurance adjuster does when the claim is filed is he asks his legal dep’t if there are any exclusions or loopholes to avoid paying the claim. Insurance companies have teams of lawyers who work on this day and night (I know, I was one of them).
For example, someone is injured midly, but you neglect to tell your insurance co about it, you will not get coverage when you are sued a year later. Also, many insurance companies are not covering mold, asbestos and other similar hazards.
Third, there are many things insurance simply does not cover, such as intentional acts, breach of contract, mispresentation, discrimination, acts of your employees, agents, partners, etc.
I recently attended a CLE seminar for lawyers on the topic of asset protection. One of the nation’s top attorneys in this field started his speech by saying he thought it was MALPRACTICE for an attorney to draft a deed putting his client’s name on a rental property without first advising his client to form an LLC.
I couldn’t more. It is so simple to incorporate your business that only a fool proceed in any high risk business without incorporating for forming an LLC.
Also, a totally overlooked point is the estate planning benefits of holding assets in LLCs - you could save yourself a $100,000 in estate taxes by some good planning using LLCs rather than dying with assets in your own name.