Insurance serves an important purpose for individuals and businesses. Insurance pays to repair damages caused by events that we are unable to prevent. We cannot prevent a lightning strike or a car crash caused by some teenager who was texting and driving. There are at least two reasons that insurance is not a perfect remedy for mitigating risk: (1) the insurance company argues that your loss is not covered and (2) your financial loss costs more than the coverage limits.
Have you ever been unlucky enough to have been told by an insurance company that the damages were not covered? An employee driving a company vehicle to wrecks into an innocent bystander while the employee is running a personal errand might not be covered. A theft of merchandise might not be covered if the thief is a business partner. There are so many different kinds of coverage, you might go broke paying all the premiums to insure against all the risk. Texas case law follows a long standing precedent set in Stowers Furniture Co. v. Am. Indemnity Co., 15 S.W.2d 544 (Tex. Com. App. 1929) to require insurance companies to accept reasonable settlement demands. Why would courts make such a rule? Texas courts must require insurance companies to accept reasonable settlement demands because otherwise insurance companies would fight every claim and leave the insured holding the bag. Insurance provides a valuable service – to cover risks that cannot otherwise be eliminated or reduced, but insurance should not be the only tool you use to protect your assets.
There are two additional ways in addition to insurance that will help you protect yourself against liability: (1) eliminate or reduce risks and (2) use a business entity like a limited liability company or a limited partnership.
You can reduce or eliminate risk that is unique to your trade or profession by learning and training from experts in your field about reducing and eliminating risk that is frequently seen in your trade or profession.
The primary advantage of setting up a business entity like a corporation or LLC is to separate the business from your personal life. Call Marquardt Law Firm, P.C. at 210-530-4278, 575-430-2353, or 512-766-3782 to schedule a free 60 minute personal consultation to start protecting your assets today.