One Crash Away From Financial Ruin - How To Protect Yourself From Auto Accident-Induced Financial Collapse

A driver must possess a minimum amount of liability insurance, which can vary from state to state, to prove financial liability. It can be easy for drivers to underestimate the possible effects of even a minor vehicle accident without this, especially when the damage to the car seems minimal. But the damage to the car often does not correlate to the injury of the occupant any more than an egg carton to the egg; If an egg carton were to be tossed around, the carton may be unblemished, but that is surely no indication of the egg’s state within the carton.

Additionally, when a doctor examines a patient post-accident, no videos, photos, or interviews by investigating officers are used in the Doctor’s medical decisions. Rather, doctors will utilize tests and physical examinations to guide their diagnosis. Depending on the number of tests or scans used, the average emergency room visit spans from $10,000 to over $20,000. If surgery is required, a person’s minimum insurance limit can be exhausted within the first few days of injury. It is not difficult to imagine that lifelong impairment or death can further expose drivers or injured parties to financial collapse.

Ultimately, the risks of driving are present whether a person is the negligent driver, or the injured party in an accident, amplifying the importance of having sufficient coverage. A potential protection to reduce the risk of personal exposure is to purchase umbrella coverage, which can be purchased as an endorsement from a person’s homeowner’s personal liability coverage. This protects against a driver’s potential future negligence and reduces the risk of a gap between the driver’s liability coverage and the injury extent of the victim at the time of negligence. To qualify for an umbrella policy to serve as excess in addition to auto liability coverage, the purchaser or insured is typically required to have the maximum amount of auto liability coverage. Umbrella insurance carriers will not attach an umbrella policy to a minimum auto liability policy, or to one that is less than the maximum coverage.

Another protection to reduce the risk of personal exposure is the fiduciary obligation that a carrier must settle the insured’s liability within the stated policy limits if it is reasonable to do so, which can further protect the insured from exposure. If an insurance carrier fails to do this it can trigger a cause of action by the insured against their carrier, which can then be assigned to the injured party to help guard against further exposure.

Furthermore, it is also important to guard against the risk of financial collapse when the negligent party has either insufficient or no liability coverage. Drivers can purchase uninsured/underinsured motorist (UM/UIM) coverage for these situations. Most states require UM/UIM to protect the public from unpaid medical expenses and a loss in work and productivity when drivers fail to carry liability coverage. Auto insurance carriers must offer this coverage, for a premium fee, unless the insured rejects it in writing. Insurers cap UM/UIM coverage to equal whatever the amount of liability insurance was purchased. So, insurers will only extend UM/UIM coverage above $30,000 if the liability coverage purchased is above that limit. Another possibility is for the insured to purchase an endorsement that attaches their umbrella coverage to their UM/UIM coverage, which stacks and serves as excess applicable coverage for injuries which would exhaust the sum of both the negligent party’s coverage and the UM/UIM.

Another protection against the risk of financial collapse in an accident is Personal Injury Protection (PIP). Depending on the insurance carrier, PIP benefits can exceed $100,000 in coverage for a relatively affordable premium. Like no-fault insurance, PIP will cover an insured’s medical expenses and loss wages regardless of who is at fault. Similarly to UM/UIM, PIP is required for carriers to provide in most states unless the insured rejects it in writing.

In the end, while motor vehicle accidents pose a significant risk to drivers, the importance of reducing exposure and gaps in coverage is often an overlooked and under-explained topic. But through umbrella coverage for the at-fault party and UM/UIM or PIP for the injured party, you can protect yourself and your loved ones from potential financial disaster.

About Russell “Rusty” Reynolds

With 25 years of experience battling powerful institutions and securing justice for victims, Rusty Reynolds, JD, has dedicated his career to representing victims of negligence. As Co-founder of Reynolds & Reynolds Injury Law, he has become a trusted trial lawyer in catastrophic injury, medical malpractice, and wrongful death cases. His work has led to landmark results, including $27.5 Million in acknowledged trucking-collision coverage for grieving families.

In today’s complex society, people are facing a litany of hazards that don’t just cause injuries—they shatter lives. From everyday routines to the places we trust for safety and care, risks are mounting, and the consequences can be devastating. Behind every statistic is a family forced to navigate grief, financial hardship, and a legal system that can feel impossible to face alone. Reynolds offers a rare perspective on where systems fail, how accountability is achieved, and what individuals can do now to protect themselves and their loved ones.