Car accidents can be expensive, especially when they are caused by reckless, financially irresponsible drivers. The car repairs and medical costs alone – not to mention the lost income from being out of work – drive many unfortunate victims into bankruptcy.

We are seeing more and more clients who fall victim to drivers who have no or minimal insurance coverage. The threats to you come from three sources:

First, minimum coverage is woefully inadequate. The required minimum car insurance in Arizona covers only $15,000 per person in damages and $10,000 in property damage. This minimum coverage does not come close to covering medical expenses for even moderate injuries. Consider that ambulance costs can be over $1,000, emergency room costs can be over $1,000, a hospital stay costs several thousands of dollars per day, and critical care is costlier yet. According to the U.S. Department of Health and Human Services, the average cost of an arthroscopic procedure is $4,500, commonly reaching as high as $7,000. Of course, that does not cover follow-up care, x-rays, MRIs, physical therapy, medication or lost income while you are in treatment and recovery. If you have to be transported by air, the cost for the transport alone could be over $20,000. If you are seriously hurt by a negligent driver, you may not be able to recover more than a tiny portion of your costs, leaving you responsible for the balance even if you lose your job in the process.

Second, many drivers causing accidents are immune to collection efforts. Many young drivers don’t have money or even jobs to reimburse their accident victims; many older drivers lack adequate liquid assets to reimburse their victims; and many Americans, victimized by the economy or poor financial decisions, owe more than they own. Do you want to be left “holding the bag” for all your costs incurred as a result of a negligent driver? Keep reading to learn how to protect yourself, but be warned: It gets worse before it gets better.

Finally, irresponsible drivers don’t have insurance. Arizona law requires all drivers to be covered for their own negligence by car insurance. But there are many irresponsible drivers in Arizona who have no car insurance at all or haven’t even registered their cars. Here are two loopholes that have allowed people to avoid taking responsibility:

• The “Borrowed Car Fraud.” Under this scheme, a person “borrows” a family member’s car. Then, if there is an accident, the family member claims that the car was stolen, not borrowed. Of course, this claim is ridiculous, but what do you do if you don’t have any contrary evidence and both the driver and family stick to their story? The only answer may be to hire an accident injury attorney who will take one-third of the recovery in return for working over many months to prove the obvious in court. The result, if you are lucky, is that you get a partial recovery that may not come close to covering your damages.

• The “Excluded Driver Fraud.” The other loophole allows the car to be registered under someone else’s insurance. The irresponsible (and generally uninsurable) driver buys a car. To register it, the owner gets a family member with a good driving record to obtain insurance covering the family member on the premise that they “sometimes” use the car, but excluding the owner because of his previous bad driving record. The insurance card shows that the car is covered with insurance but does not state that the owner is an excluded driver.

Protections Available to You

Don’t Settle for Minimum Coverage. Don’t let the fact that you have car insurance with minimum limits lull you into a false sense of security. If you cause an accident that results in losses and claims that exceed your policy limits, you may have to endure a lawsuit against you and your spouse, resulting in a judgment, seizure of at least some of your assets, and garnishment of your bank accounts and earnings until you pay the judgment in full. To avoid this scenario, contact your insurance agent about increasing your coverage to protect your assets.

Protect Assets in Excess of Normal Car Insurance Limits. Do you want to protect your business, real estate and other assets and you have already purchased maximum car insurance? Consider getting an “umbrella” liability insurance policy. Umbrella policies cover you in case of a disaster where your normal liability insurance would be exhausted. The cost of umbrella coverage is normally reasonable, because the insurance company has to cover only accidents that would not be covered by normal liability policies.

Protect Yourself Against Irresponsible Drivers. Don’t leave yourself, your family and your assets in jeopardy from irresponsible drivers. Look into getting “uninsured motorist” and “underinsured motorist” (UM/UIM) coverage. Just like it sounds, uninsured motorist insurance covers you if an uninsured driver causes an accident resulting in injuries to you. Underinsured covers you for damages if the other guy’s policy is not large enough to cover all of your damages. Call a good insurance agent and shop around for coverage. There are often good-driver discounts and discounts for buying your homeowners and car insurance from the same company.

Questions? Asset protection involves much more than just insurance planning; it includes exemption planning, tax minimization strategies, estate planning and much more. An attorney who is experienced in this area can help you identify your vulnerability and recommend an appropriate asset protection strategy.