Can I Lose My House Due to At-Fault Car Accidents?

The moments immediately following a car accident can be disorienting. You’re in a compromised position, and you aren’t sure what just happened. You don’t know who’s injured or the extent of the damage that occurred. 

While some of this initial shock goes away once you begin piecing together what happened, the remainder of your healing journey can be equally complicated. 

For instance, you might wonder who was to blame for the collision and the consequences you might face if that person was you. You may start asking questions such as, “Can I lose my house due to at-fault car accident?”

At Sweet Law, we know that uncertainties like these can be more than upsetting. You deserve clear answers that can put your mind at ease and help you focus on getting better. Today, we’re taking a closer look at this specific question and sharing the insights you need to know. 

Understanding Fault vs. No-Fault States

Each state has its own laws and regulations it follows when determining car accident fault. In the U.S., states can choose to be designated as either at-fault or no-fault. Let’s take a closer look at the differences between the two.

At-Fault States

If a car accident occurs in an at-fault state, then the insurance companies of both parties will review the details and make a judgment on who should be held responsible. Depending on the details of the accident, this process can be simple and straightforward or lengthy and complicated. 

When it’s clear who caused the accident and one party admits fault for it, then the at-fault driver’s auto insurance coverage should kick in. This means that their insurance will pay for the injured party’s medical bills and property damage. In some situations, the at-fault driver will also be responsible for covering other damages, such as pain and suffering. 

What happens when the fault isn’t as easy to prove?

In that case, it can get a little murky, but at-fault states still have protocols that all parties must follow. When this occurs, insurance companies will usually hire a claims adjuster to dig more deeply into the actions that led to the accident. In 2023, 38 states were identified as at-fault states.

No-Fault States

In no-fault states, accident claims operate a little differently. Here, the at-fault driver is only responsible for covering the car accident damage that occurred to the vehicle itself. 

In addition, all drivers are also required to carry a minimum amount of personal injury protection (PIP) insurance that will cover all bodily injury claims. 

If an accident occurs, each driver’s PIP coverage will help pay for any medical bills, therapies, or treatments they require. In addition, it will normally cover lost wages, all up to the policy’s designated limit. This is the case regardless of which driver’s actions ultimately led to the accident. 

While this is usually how the process goes, there are exceptions. 

In some instances, no-fault states may allow drivers to sue the at-fault driver for severe injuries. For this to apply, certain conditions must be met. To date, there are 12 no-fault states across the U.S., as well as the District of Columbia. 

Choice No-Fault States

To complicate matters even more, three no-fault states are identified as “optional no-fault” or “choice no-fault” states. These include New Jersey, Pennsylvania, and Kentucky.

In these states, drivers can decide whether they want to follow a no-fault system or not. They can choose between a typical, no-fault auto policy and a traditional auto insurance policy depending on their needs and preferences. 

Can I Lose My House Due to At-Fault Car Accident?

If you’ve been involved in an auto accident, you’ll need to first determine fault, as detailed above. You can start by researching the car insurance laws in your state, and determining whether it follows an at-fault or no-fault system. 

If you’re a defendant in the case and you’re found to be at fault, the consequences can vary. As long as the damages and injuries are minimal, your auto insurance may cover most of the damages. However, for more severe and significant injuries, you may pay more for the treatments than your insurance will cover. 

If this ever happens, you may wonder how you’ll come up with the rest of the money. As you look around your home, you might feel like you’re living on borrowed time and all of your possessions, including your home, are about to be taken away from you. While that might seem like the immediate case, the reality is a little more layered and nuanced. 

Most of the time, at-fault drivers only find themselves in that unfortunate situation if their liability coverage isn’t sufficient to pay for the damages that the other driver suffered. Let’s take a closer look.

Understanding Liability Coverage

If you caused an accident that resulted in property damage or medical bills for another party, this can be a scary feeling! We get it. Paying for car accidents isn’t cheap or easy, especially if the impact is major and the expenses are high. 

This is where liability insurance comes into play. This is a type of coverage that’s designed to cover the costs of someone else’s injuries and property damage if you’re at fault for causing an auto accident.

Every auto insurance policy has what’s known as a liability coverage limit. This is the maximum amount that your auto insurance company will pay to help cover a single accident. 

For instance, your state might require you to hold liability insurance for $15,000 to cover injury and death, $30,000 for accidents, and $5 for property damages that involve and injure multiple people. While these are minimum limits, policyholder often chooses to extend their coverage beyond those amounts. 

While this can help them in the event of an accident, even extended coverage may not suffice for major collisions. If the damages suffered exceed your current liability coverage, then you could be personally liable for covering the rest. For instance, say you carry a policy that has a $75,000 limit, but the damages totaled $125,000. 

In that case, you would be responsible for covering the remaining $50,000. If you don’t have that money readily available, the injured party could file a lawsuit against you so they can recover the outstanding damages. When this happens, the state could begin to claim your assets, which can include:  

These include: 

• Your house
• Your vehicle
• Your savings

Hiring a Car Accident Attorney

To make sure you don’t wind up in this spot, take the time to read your insurance policy front to back. While it might not be riveting material, it can help you learn about your minimum liability insurance limits. 

If you do reach your limit, the assets above could be at risk. This is why it’s critical to hire a car accident attorney to help you through this process. Your lawyer will assess your case to understand if your home could be at risk. 

Not only will they know how car accident laws work and apply in your state, but they’ll also know which measures are in place to protect your property. For instance, some states have regulations called homestead laws that safeguard a portion of your home equity from being captured by creditors.

While the protected amount can vary from state to state and may not be sufficient enough to fully protect your home, this is an opportunity you may not have known about without legal counsel. Another reason to hire a lawyer is that this expert can negotiate with the insurance company on your behalf, so you can focus on getting better. 

Protecting Your Assets

To the greatest extent possible, you want to protect yourself from the devastating situation of losing your assets. To protect them as much as possible, it’s important to make sure that your liability coverage and net worth are balanced. Your net worth is all of your assets, minus liabilities, which includes your house. 

When reviewing your liability coverage, make sure the amount is large enough to match your net worth. If your net worth greatly exceeds the established coverage limits, then you may need another type of coverage called an umbrella policy. 

In short, this policy is meant to fill in the gap, going above and beyond your baseline car insurance policy and liability coverage. It will cost more each month, but it can give you invaluable peace of mind and an extra layer of protection when you get behind the wheel. 

Secure Your Assets and Your Peace of Mind

No matter how safe you might be on the road, the reality is that car accidents can happen. If your actions led to one, you might wonder, “Can I lose my house due to an at-fault car accident?”

We understand your concerns, and we want to help you navigate these next steps in confidence. If your auto insurance liability coverage isn’t sufficient to cover the other driver’s damages, there may be other courses you can take. 

You don’t have to face this process alone. Our accident attorneys can help you understand your policy and what may happen as the case progresses, so there are no more surprises.

To learn more, contact us today for a free consultation!