Liability insurance allows you to protect yourself and your business, as well as manage your risk, through the purchase of an insurance policy. In exchange for the payment of a premium, you can usually ask the insurance company to pay the costs of defending you in a lawsuit, as well as any judgment or settlement within the policy limits. Typically, with this type of policy, you defer all decisions regarding any lawsuit to the insurance provider and, to the extent a judgment exceeds the policy coverage limits, your property may still be exposed.
Another way to protect assets from a judgment, particularly assets belonging to your spouse, is to title them separately. You can either title assets entirely in the name of your spouse, or put them in a trust designed to protect assets. Because a trust is a separate legal entity, any property transferred to it is no longer your property, and no longer subject to claims by creditors. A significant risk to this approach is there is no guarantee that your spouse can never be sued for his or her own actions.
Business Entities for Asset Protection
Under the business laws of Massachusetts, you can shield yourself from liability with certain specific legal entities. If you create a limited partnership, limited liability company, or corporation, your liability will typically be limited to the amount of your investment in that entity.