The following is a guest post. Enjoy!
You’ve worked hard for every asset that you own. And the last thing you want is to lose your valuable personal assets. That’s why protecting your assets is important.
This is especially true in a state such as California, where natural disasters and lawsuits are unfortunately all too common. So we'll use California as an example for this article.
Not all personal assets are tangible. For instance, a bank account is known as an intangible asset. But for most people, the majority of their personal assets are tangible - which means physical. So, here are three ways to protect your tangible personal assets from various mishaps.
Auto Insurance
Auto insurance is a requirement in the U.S. If you own a vehicle in California, that vehicle must have liability coverage or greater. Liability is sufficient to keep your car on the road. But having additional coverage can help too.
One thing to consider is whether or not you live in a no-fault state. Is California a no-fault state? No, California isn’t a no-fault state. This is important to know when considering auto insurance. In a no-fault state, drivers who suffer damages or injuries in an auto accident use their own insurance to cover their expenses. It doesn’t matter who is actually at-fault, because everyone should have their own insurance to cover their own expenses.
California is an at-fault state. The driver who causes the accident is responsible for the injuries or damages suffered by the other driver. That means if you cause the accident, then you’re responsible for paying the other person’s expenses plus any of your own.
Since California is an at-fault state, California residents might want to go above basic auto liability coverage. For example, you might consider uninsured or underinsured auto coverage. This is a type of coverage that pays for your damages and injuries in case the other driver doesn’t have any--or doesn’t have enough--insurance.
You can find out whether your own state is an at-fault state or a no-fault state by doing a quick internet search. But if you’re in an accident without adequate auto insurance in an at-fault state like California, it could possibly put your personal assets at risk. For example, if the other person doesn’t have coverage, then you could end up in medical debt or worse because of expenses.
And if you’re at-fault for the accident, you could be found liable for thousands of dollars worth of damages. Without insurance, you’ll have to pay the expense out of pocket. In either case, being without insurance can possibly cause you to lose your personal assets.
Limited Liability Corporation (LLC)
Self-employed individuals have to protect their personal assets from possible lawsuits. When you’re self-employed without a formal business structure, your personal assets could be at risk if your business is sued. One way to protect yourself is by forming a Limited Liability Corporation (LLC). (This is important no matter where you choose to operate, but if you start a business in a lawsuit-heavy state like California, you'll want to make sure you have an attorney to help you get this set up.)
An LLC is a business structure that offers personal liability protection. It separates your business assets from your personal assets. This means creditors can’t take your personal assets, such as your car or home, to repay your business debts. And if a person sues your business, then your business assets are at risk and not your personal assets.
One or more people can form an LLC. So if you’re a sole proprietor, such as a self-employed graphic designer, you can form a single-member LLC.
Homeowners Insurance
If you’re like most people, then most of your personal belongings are stored in your home. Items such as your computer, jewelry, furniture, and car are tangible personal assets. Securing your home with insurance is a wise decision when it comes to protecting your property.
Homeowners insurance includes coverage for things such as personal belongings, liability, fire damage, and more.
Liability helps when someone is injured in your home. If you’re liable for the damages, then your insurance will help with medical payments. Coverage will also help if you’re sued and need help paying legal fees. But without coverage, you’ll have to pay everyone on your own, which could mean selling your personal assets in order to pay what you owe.
Homeowners insurance will also provide assistance if personal items are stolen from your home or damaged in your home. This coverage will pay to replace or repair your items - as long as it’s the aftermath of a covered event, such as theft or a fire. In some states, like California or Florida, natural disasters are commonplace. California has more than its fair share of earthquakes and wildfires, and Florida more than its share of hurricanes.
Without homeowners insurance, you’re financially responsible for anything that occurs in your home. That means if your personal items are stolen or damaged, you’re responsible for replacing them or paying for damages.
To protect the personal assets in your home, consider homeowners' insurance. And if you’re renting, you can consider renters insurance. It doesn’t provide coverage for the property, but it does provide coverage for the personal assets in your rental.
