How Liability Insurance Plays a Key Role in Asset Protection Planning?
Asset protection planning should be seen as a lifelong endeavor. A vital asset protection strategy will concentrate on property management and preservation both during and after death. Asset protection strategy can safeguard personal assets against business and investment legal hazards, professional and company liability and regulatory responsibility.
Liability insurance is the cornerstone of every asset protection plan. Asset protection planning is intrinsically concerned with fraudulent transfer issues, which frequently concentrate on insolvency. Before making any transfers for asset protection planning purposes, the customer should obtain as much insurance as is practically possible, because the greater the insurance coverage, the less likely the client will be declared insolvent.
The practical rationale for ensuring appropriate insurance is that if a specific claim is covered by insurance, the asset protection plan may never be initiated in the first place. Because of the risk of litigation, even if a claim exceeds policy limits, most claims will be settled within policy limitations.
The objective of a comprehensive asset-protection plan is to secure your business and personal assets from creditors’ claims in order to avoid or considerably decrease risk. When examining a client’s coverages, the scope of coverage (what claims are covered or not covered), and the policy limits are the two most important factors to consider. When it comes to coverages, the planner will frequently discover that the client believes they are covered for all of their risks, yet their policies contain gaps.
Business owners believe that their general liability insurance covers such claims, but this is not the case. A special insurance policy or a rider to an existing policy is generally required to cover these types of claims. Another aspect a planner should consider is the policy’s limits and if they are sufficient for most of the anticipated claims.
Some of the planners who believe that they have some knowledge about asset protection planning will tell their clients, “Once you have your asset protection plan in place, you can give up your insurance coverage because you will not need it anymore.” This is a hidden sales pitch, as the planner is attempting to persuade the customer that the savings on insurance would offset the cost of their asset protection plan. This is just insane, and it’s a sure sign that such a planner has no idea what they are doing.
Developing and executing an effective asset-protection strategy encompasses practically every facet of your company. The plan’s purpose is to secure your business assets while keeping your operations running smoothly. Using legal, legal concepts and entities to protect your business is both permissible and recommended. Extending these intentions to deceive other businesses or persons is not considered asset protection planning, it’s a scam.