Minimum auto insurance coverage requirements, penalties for being uninsured, and the Colorado Unfair Claims Practices Act
Like almost all other states, Colorado, requires drivers to have automobile liability insurance. Nevertheless, an estimated 16.3 percent of drivers in Colorado are uninsured.
In this article, we’ll take a look at auto insurance in the Centennial State, including the minimum amount of insurance you’re required to carry, the penalties for driving without insurance, and whether your auto insurance policy will cover an accident if you let your friend or family member borrow your vehicle.
Colorado auto insurance minimum requirements
Colorado law requires anyone who drives a motor vehicle or motorcycle in the state to carry liability insurance with the following minimums:
- $25,000 for bodily injury or death to any one person in an accident;
- $50,000 for bodily injury or death to all persons in any one accident; and
- $15,000 for property damage in any one accident.
This type of minimum insurance requirement is typically referred to as “25/5015 coverage,” and it’s how most people will comply with the law. Individuals who have more than 25 vehicles registered to their name have the option to self-insure by applying for a certificate of self-insurance from the Colorado Department of Regulatory Agencies.
Colorado’s liability insurance requirements only apply to motor vehicles and motorcycles. Motor scooters, mopeds, and bicycles are not required to be insured.
What does liability insurance cover?
Liability insurance pays for the damages sustained by OTHER drivers and passengers in a car accident that YOU cause up to the coverage limits (it doesn’t cover the damages you sustain).
If the damages exceed your coverage limits, you will be personally responsible for paying those damages. For this reason, many people choose to purchase liability insurance that exceeds the minimum requirements.
How much does car insurance cost in Colorado?
On average, the minimum liability insurance plan in Colorado costs $466 per year (paid in monthly installments). Full coverage costs an average of $2,004 annually (slightly higher than the national average).
Insurers use a number of factors to determine your specific auto insurance rate, including:
- Your age, gender, and marital status
- Your vehicle's make, model, and year
- Your insurance claim history
- How many miles you drive per year
- Your past violations and accident history
- Where you live, work, and park your car
- Your driving experience
It’s a good idea to shop around before purchasing auto insurance. Just make sure you only consider policies from licensed insurance companies doing business in Colorado. You may also be able to bundle your homeowners’ or renters’ insurance to get cheaper rates.
Penalties for driving without insurance in Colorado
Colorado requires drivers to provide proof of insurance upon request from a police officer. Drivers who are unable to produce proof of insurance are subject to the following penalties:
|Penalties for driving without insurance in Colorado|
|First Offense||$500 minimum||None||Suspended until insurance purchased||Up to 40 hours||4 points|
|Second offense||$1,000 minimum||10 days to 1 year||Suspended for four months||Up to 40 hours||4 points|
|$1,000 minimum||10 days to 1 year||Suspended for eight months||Up to 40 hours||4 points|
The most severe consequence of driving without insurance, however, is that uninsured drivers who cause an accident are personally liable for all of the damages that result.
Not worried about being personally liable because you don’t have any money?
Even if you don’t have any money in your bank account, the injured driver can obtain a court order that allows them to garnish your future wages and sell your assets (including, in some cases, your house and vehicle).
Optional Colorado insurance coverage
The minimum liability insurance required may not be enough to cover an accident that causes serious injuries or property damage, leaving you personally liable for the amount of damages that exceed your policy limits. For this reason, many people choose to purchase additional liability insurance.
Along with additional liability insurance, drivers in Colorado can purchase the following optional coverage:
- Comprehensive coverage provides coverage for losses other than those caused by a collision (vandalism, hail, fallen tree, etc.)
- Collision coverage provides coverage for damage to your vehicle caused by an accident with another vehicle or an object (such as a telephone pole)
- MedPay provides coverage for medical expenses incurred by you and your passengers, regardless of who is at fault. MedPay coverage is generally offered in increments of $1,000, up to a maximum of $25,000.
- Uninsured motorist (UM) coverage provides coverage for bodily injury and property damage sustained by you or the passengers in your vehicle as a result of an accident involving an uninsured driver.
- Underinsured motorist (UIM) coverage provides coverage for bodily injury and property damage sustained by you or the passengers in your vehicle as a result of an accident involving a driver who has insufficient insurance to cover the damages.
All policies are not created equal. Be sure to read each policy carefully to make sure it covers what you want it to cover.
Does your insurance policy provide coverage if a friend or family member borrows your car?
Your friend, Samantha, bikes over to your house to watch the Superbowl. During the second quarter, you run out of chips and salsa. Grateful for being invited to your house, Samantha volunteers to pick up more chips and salsa during halftime. You let Samantha borrow your car.
On the way to the convenience store, Samantha runs a stop sign and crashes into another car. Your car is damaged, and the other driver suffers a serious injury.
Will your insurance cover the damages to your car? What about the injuries suffered by the other driver?
Contrary to what many people believe, liability insurance generally follows the vehicle in Colorado, not the person. In other words, your liability insurance should pay for the damages to the other driver.
If the damages exceed your policy limits, Samantha’s insurance may act as secondary coverage (i.e., cover the difference between your policy limits and the amount of damages sustained).
Collision and comprehensive coverage also typically follow the vehicle in Colorado. On the other hand, MedPay coverage follows the driver.
Pursuing damages after a Colorado car accident
Colorado has a fault-based insurance system. This means that the person responsible for causing a car crash is also responsible for paying the damages that result.
If you’re involved in a Colorado car accident that’s not your fault, you have 3 options for recovering damages:
- File an insurance claim with your own insurance company (in this situation, your insurance company will turn around and pursue reimbursement from the at-fault driver’s insurance company—this is called subrogation)
- File a third-party insurance claim directly with the at-fault driver’s insurance company, or
- File a personal injury lawsuit in civil court against the at-fault driver.
Unfortunately, if the driver who caused the accident doesn’t have insurance, your only option is to file a personal injury lawsuit against the driver for any amount that exceeds your uninsured motorist coverage (if you have it).
Your rights under the Colorado Unfair Claims Practice Act
It might not seem like it when you purchase an insurance policy online, but an insurance policy is a contract between you (the insured) and the insurance company. In exchange for your monthly premium, the insurance company agrees to provide the coverage set forth in the policy.
Colorado passed the Colorado Unfair Claims Practice Act to ensure that insurance companies hold up their end of the bargain.
The Act makes it illegal for your insurance company to unreasonably deny your insurance claim or engage in any unfair practices, which include things like:
- Misrepresenting pertinent facts or insurance policy provisions
- Failing to acknowledge and act reasonably promptly after a claim is filed
- Failing to promptly investigate a claim
- Refusing a claim without conducting a reasonable investigation
- Failing to affirm or deny a claim within a reasonable time
- Forcing the insured to initiate or submit to litigation by offering substantially less than the amount ultimately recovered in litigation
If your insurance company behaves unfairly, you have the right to file a bad-faith insurance claim.