Insurance and Real Estate : Link Exists Between Auto, Home Coverage

You probably don’t realize there is a relationship between your auto insurance coverage and the security of your real estate and personal property. It would seem the two are unrelated. The auto insurance policy covers your car, and the real estate policy covers your other property, right? Partly right and partly wrong!

Your real estate insurance policy covers physical damage to your property and liability exposure in connection with its ownership. Your auto insurance policy covers physical damage to your car and liability exposure in connection with its operation.

But, the distinction between the two is not as clear as it would seem. When you are sued by someone for alleged damages, it doesn’t matter whether the act resulting in the suit was from property ownership, operation of your car, or some other act. All your assets are at risk.

For example, if you are involved in an auto accident, are sued as a result, and a judgment is rendered against you, you must pay the other party even if your auto insurance policy doesn’t have enough liability coverage to pay the full judgment. If you don’t have enough liquid assets (cash or cash equivalents) to pay the difference between the judgment and what the auto insurance policy will pay, you may be forced to sell your real estate or other assets, or forfeit future earnings to fully satisfy your legal obligation. It is even possible you could be forced into bankruptcy as a result of being underinsured.

The solution is to make sure you are carrying enough auto liability insurance to cover any potential liability that could arise from the operation of your cars. Check with your insurance agent to make sure you are adequately covered.