Today I’m going to talk about liability insurance, a type of coverage that many of you have heard about but might not understand what it covers, how it works, how much it pays, or how to read those crazy numbers with slashes in it. I’m also going to explain why is it often referred to as the cheapest insurance coverage and what Colorado law requires you to carry.
What is liability insurance? Liability insurance is intended to protect your assets if you are found legally responsible for a covered accident, including expenses associated with bodily harm sustained by the other party as provided by your policy and State law. This coverage will also provide for your legal defense if a suit is brought against you as a result of this accident.
I’m going to cover how you read what limits of liability you are carrying. Some of you may have what’s called a 500 CSL, or a Combined Single Limit (CSL) for liability. This means you have $500,000 for Liability. The combined single limit simply states a single dollar limit that applies to any combination of bodily injury and property damage liability claims. In comparison, split limit insurance is where three separate dollar amounts apply to each accident: per person limit, per occurrence limit for all injured persons, and per occurrence limit for all property damage resulting from the accident. Here is an example of what is called a split limit 25/50/15. These limits are in thousands, so it would read $25,000 per person, not to exceed $50,000 per accident for bodily injury and $15,000 for property damage. I have also seen split limits of liability as high as 500/500/500. This is also in thousands, so this would read $500,000 per person, not to exceed $500,000 per accident for bodily injury and $500,000 for property damage.
Liability Insurance is often referred to as the cheapest insurance and here’s why: Liability insurance is the minimum the State requires you to carry when you are operating a motor vehicle. Liability insurance only covers the person that you ran into. It does NOT cover any of YOUR bodily injury, YOUR medical bills, or YOUR property. When you carry just liability, you are 100% responsible for your damages and bodily injuries sustained in your vehicle, including the injuries to your passengers.
The State of Colorado requires you to carry liability insurance on ANY MOTORIZED vehicle you operate. This means your car, your truck, your motorcycle, your boat, your four-wheeler, your golf cart, your scooter. If it has a motor, you are required to have liability insurance on it. I have even seen signs on 4x4 trails, boat docks and BLM land that require you to carry liability insurance. It doesn’t matter if you are on a backroad in the boonies, in town or on the State highway...You are bound by the State laws, NO exceptions. The State of Colorado requires you to carry a minimum of $25,000 per person, not to exceed $50,000 per accident for bodily injury and $15,000 for property damage. Guys...this is REALLY LOW. Let’s think about this for a moment. If you were to get into a serious accident, those limits would be eaten up real quick. With the rising cost of medical help, I always mention that $25,000 wouldn’t even get you around the block in an ambulance. The $15,000 for property damage is obviously not near enough. Shoot, a new truck can cost $70,000 or more! If you were to run into a $70,000 truck, total it and you had $15,000 property damage liability limits, that would leave a balance owed of $55,000 after the insurance company paid the max of $15,000. The truck owner could then (and likely WILL) come after you for the remaining $55,000. The owner could and would exhaust all of his options to collect this money. Isn’t that terrifying?! This could cost you everything you worked so hard in life to own. We recommend that you carry at least a minimum of $100,000 per person, not to exceed $300,000 per accident for bodily injury, and $100,000 for property damage if you are a home owner. This is a higher limit form of liability coverage, so remember that this type of insurance only covers the other party. This coverage cannot be taken lightly. It is the most important coverage you can ever have on an auto policy. *There are other forms of insurance outside of liability only that would cover your property and bodily injury, but we’ll discuss that in another blog.
I hope this helps you understand how liability insurance works. If you have any questions or would like to talk about your insurance please let us know, we would be happy to help! Thanks for your time in reading our blog today. And remember, Sterling Peaks Insurance...We take the confusion out of insurance.
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