newbogleb wrote:Having read the wiki about Asset protection and some posts about annuities/life insurance I was a bit confused.
* To take an example from a wiki: suppose I hire someone to help me garden, and they get injured. Then I get sued. The amount exceeds my home owners/umbrella insurance policies. It's not covered by a malpractice policy.
* Another example: I start a small business. Suppose a super dissatisfied customer sues me.
In both cases the judge agrees with the other person and I'm asked to fork over my life savings. (Note in real life neither happened).
Can one use term life insurance or must one buy the overpriced whole life to have protection (and if so why)?
I wondered how to determine if the costs of annuities/life insurance would be worth it?
Its having been resurrected:
-case scenarios are always terrible. There's no way to protect against them fully. Plan and protect against bad
-case scenarios instead.
For the gardener: maybe somebody will use that case to make a particular political point, but probably not. Carry enough personal injury liability and umbrella insurance that your insurer will be extraordinarily aggressive in court. Betcha the other party settles instead, and for an amount reasonably fair considering the extent of the injury.
In the case of the side business, buy business liability insurance, and perhaps errors and omissions insurance if it applies in your case. Ditto on the aggressive insurance company and settlement.
There are asset-protection strategies available. If your life savings is big enough, or your future likely income to be garnisheed so large, you may want to look into them. They won't preserve a Miami mansion and NYC, London, and Paris pied-à-terres. But they'll enable you and your family to meet essential living expenses.
Now, I wrote not to try to fully protect against worst-case scenarios, but let's address it anyway. Buy life insurance, as you said.