What is Liability Auto Insurance?

Liability Auto Insurance is the most basic and common form of auto insurance.

But what is it and what does it do ?

Man inside of car making a sudden move with steering wheel

Let’s take a quick look at the word Liability, which comes from the word Liable. Here’s a couple examples.

Example – Intentional Action

Say Frank was carrying some boxes down the hall and Sue, while watching Frank come down the hall, decided to stick her foot out and trip Frank. If Frank fell and was injured, or his boxes were damaged,

Sue would be liable for any injuries to Frank and or damage to the boxes.


Because Sue purposely tripped Frank. Sue caused the damage to Frank and is Liable.

Silly example but you get the point. In this case Sue purposely tripped Frank.

Example – Negligent Action

But what if Sue accidentally left her skateboard in the hall and when Frank walked by he stepped on it and crashed. Is Sue still liable?

Yes, Sue is liable because she was negligent when she left her skateboard in the hallway where people walk.

So that’s how it works in auto insurance as well.

Whether I meant to cause damages or it was an oversight or an accident, if the “incident” was my fault and there is damage, I am liable for those damages.

What is the purpose of liability insurance?

The purpose of liability insurance is to “cover” your liability, and pay the claim for damages on your behalf, (up to the limits on your policy).

Let’s get back to auto insurance now.

Most states require Liability Insurance for all operators of motor vehicles, but the minimum required limits vary by state.

Colorado Auto Liability Insurance Minimum

In Colorado our minimum liability limits for auto insurance are $25,000.00 / $50,000.00 / $15,000.00 per accident. These are just the minimum limits, you can choose higher limits than the state minimums.

What do those numbers mean?

The first two numbers represent the maximum dollar amount that your insurance company will pay to others for their Bodily Injury if you are found liable, ($25,000.00/$50,000.00 per accident).

Why two numbers?

Good question, there are two numbers because in Colorado we have a “split limit.”

  • The first number represents the maximum dollar amount your policy would pay out if you only injured one individual ($25,000.00 per accident).
  • And the second number is the maximum dollar amount paid for a group (two or more) of injured individuals to share, ($50,000.00 per accident).

So If you cause an accident, the Bodily Injury limit that will be in effect for the claim depends on how many people were injured.

What about that third or last number?

The $15,000.00 in our minimum limit example above? That number represents the Property Damage Limit. This is the maximum dollar amount that the policy will pay out for property damage caused by a covered driver listed on the policy.

So if I’m liable for property damage, and I have the Colorado state minimum limits, the most my policy will pay for damages I cause to property would be $15,000.00.

Everyone still with me? it’s not so bad right?

What if I exceed the dollar amount of my limits?

Now let’s get a little dirty, so what if the damage or injuries I’ve caused exceed the dollar amount of my limits? That is not a good thing.

Lets just say I am liable for damages of $40,000.00 because I just totaled my neighbors Mercedes Benz, and I only have a Property Damage Liability limit of $15,000.00.

Bad news. My insurance company will still pay out but only up to my limit of $15,000.00. My neighbor will most likely be taking me to court for the remaining $25,000.00.

A fundamental reason for insurance is to protect yourself from being sued for damages you may cause. Thus, it is very important to maintain a policy with limits that will protect you and your assets.

There you have it, liability coverage pays out to others for injuries and property damage caused by the insured, (who would be liable), but only up to the liability limits on the active policy.

We at A Better Choice Auto Insurance Agency Inc. have been helping our clients with their liability insurance needs for almost twenty years, we would love an opportunity to help you too.

As always, Thank you for reading. I hope this was informative and helpful. please call us at 719-667-1301 if you have a question. We’re happy to help.

Please Drive Safely

John Walker | Owner & Insurance Agent | A Better Choice Auto Insurance
John Walker

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