A car accident can get expensive quickly. Between the cost of auto repairs and medical expenses, it’s easy for even a small accident to cost several thousand dollars. This is why it’s important to maintain auto insurance with high limits of liability. If you ever cause a car accident that costs more to repair than your insurance will pay for, you may be liable to pay the rest of the damage out of your own pocket. If this happens you can often be sued for damages as well as injuries.

The person that you hit may sue you privately, or you could be sent to collections by an insurance company if you owe money beyond what your own coverage paid in the accident. In any situation where suit papers are received, it’s a good idea to consult with an attorney. If you have auto insurance, your insurance company should be able to assist you in finding and paying for legal representation.

Fault and No-Fault States

All states are either no-fault or tort states. In a no-fault state, the insured’s own coverage must pay for his injuries regardless of who caused the accident. In a tort state, a driver can file a claim against another driver’s insurance for injuries to sue that person privately. Most states are tort states, but Hawaii, Florida, Kansas, Massachusetts, Michigan, Minnesota, North Dakota, New York and Utah all have some form of no-fault law.

Even in a no-fault state, a driver can still be sued for pain and suffering or lost wages. Some states handle these lawsuits differently than others; in California, for example, a person can only sue for pain and suffering if he has insurance on his own vehicle. Because insurance laws vary so much from one state to the next, it’s always a good idea to speak with an attorney who is experienced with insurance law in your area.

What to do if you are sued for damages?

If you receive suit papers for an auto accident, you should always let your insurance company know. The adjuster will be able to provide guidance about the next steps of the insurance process. He may also be able to help you afford an attorney that can represent you in court.

In some situations, car insurance companies are able to find additional funds to pay for claims that cost more than the policy’s liability threshold. For example, some states allow an insurance company to borrow funds from one policy and “stack” them onto another policy’s limits. Stacking coverage allows an insured to use liability coverage from multiple vehicles to pay a single claim.

Some people may also carry personal liability or umbrella policies. These are usually sold in a bundle with homeowner’s insurance and help to protect a person’s assets from lawsuits. An umbrella policy can be used any time a person may be liable for injuries or damage, such as when his dog bites someone or a guest falls at his home. Umbrella policies can also be used to pay for injury or damage claims in excess of a vehicle’s liability limits.

It’s not always possible for the insurance company to pay the lawsuit settlement, but most companies will try diligently to work with you and the attorneys to reach a solution.

What if you don’t have car insurance?

Drivers who don’t have auto insurance are still liable for any damage that they cause. This can be extremely pricey and may financially ruin an individual if he is responsible for a major car accident. In most cases, an uninsured driver will have his license suspended until he is able to provide proof of insurance.

If you are involved in an auto accident with a person who does have insurance, his insurance company will likely send you to collections to recover any expenses that they paid. You may also be sued privately for additional injuries, lost wages or other claims expenses. Because you have no insurance, you will have to find and pay for your own lawyer as well.

The best way to avoid being involved in a lawsuit for a car accident is to carry the appropriate amount of liability insurance at all times. While it may be tempting to save money on insurance premiums by purchasing very small amounts of coverage, the consequences of cut-rate insurance can be devastating.

Instead of sacrificing your liability coverage, check with your insurance company to see if there are any discount programs you can take advantage of. You can also comparison shop online for a new insurance company that can offer a lower price for the coverage that you need.