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Car insurance is mandatory in Colorado. Colorado law on car insurance changed in 2003 when the state changed to a fault-based system from a no-fault system. Even more requirements were added in 2009 for drivers, namely, a mandatory $5,000 in medical payments coverage.

Many of the other changes made to Colorado car insurance requirements were made to help prevent claim abuses and reduce the cost of insurance premiums for drivers in the city. The ‘tort’ or fault-based system requires that fault must be established before a claim is paid by an insurance company.

According to data released by the National Association of Insurance Commissioners, the average cost of auto insurance in Colorado was $777. This is way below the national average of $841 and far below the most expensive state, New Jersey, which had an average expenditure of $1,254 in annual premiums.

Colorado Insurance requirements

The state requires all drivers to have liability coverage at the least. This ensures that the other party and their property will be compensated in an accident that is your fault. According to insurance-comparison site, CoverHound, the minimum coverage for car insurance in Colorado should include:

• Bodily injury coverage of $25,000 for each person involved in the accident
• Bodily injury coverage of at least $50,000 for each accident the motorist is involved in
• Property damage coverage of $15,000 for each accident

Additional car insurance

Having insurance coverage meeting the minimum requirements of the law in Colorado will save you from being arrested for inadequate insurance. However, your insurance may not provide you with adequate coverage in case of an accident. Therefore, it’s important to consider the following car insurance options.

1. Uninsured/Underinsured motorist coverage

While car insurance is a mandatory in Colorado, several drivers still drive without auto insurance. Figures released by the Insurance Research Council estimate that 16.2 percent of motorists in the state are uninsured. This is slightly above the 12.6 percent national average. The scary thing about not having this coverage is you never know when you’re going to get in an accident, let alone an accident with someone who’s underinsured, or uninsured altogether. As you can probably guess, if someone isn’t willing to pay an insurance premium to protect their financial means, they probably don’t have much financial means to protect in the first place, thus leaving you destitute in the event of an accident, regardless of fault. Bottom line: uninsured/underinsured motorist coverage protects your expenses in this situation.

2. Medical Payments Coverage

Due to the aforementioned legislation passed in 2009, insurance providers are required to offer motorists $5,000 in med pay coverage as part of their insurance coverage. This is offered as part of every car insurance policy, and can be adjusted in $1,000 increments. You however, have the choice of opting out, but you have to send a rejection form. You can also choose to up your coverage to as much as $100,000.

3. Collision coverage

Liability coverage ensures that the other party’s expenses are covered in the event you cause an accident, but what about damage to your own car? Collision coverage takes care of any damages to your car regardless of who’s at fault. The insurance also covers you for damage caused by hitting other objects with your car, such as a tree, or streetlight.

4. Comprehensive cover

This ensures that you are covered for any damage that is caused to your car that doesn’t involve a collision (e.g. fire, falling objects, flood and hail). It also provides cover for the loss of your car through theft and other perils such as explosions.

If you purchase your car through a loan, your lender may require you to take out a comprehensive coverage policy. You can choose to have a higher deductible in order to reduce the cost of your premium.

Cost of violations

There are various penalties set by the state to ensure that motorists have adequate insurance. You may be penalized for failing to provide evidence of insurance or for purchasing inadequate insurance. Some of the penalties and fines include:

• A minimum fine of $500 for violations
• The addition of 4 points to your driver’s license
• The suspension of your license for up to 8 months
• Community service

It is important to understand your state laws and your own financial situation when choosing insurance. Your policy should not only meet state law requirements but your personal requirements as well. If it doesn’t, then what’s the point of having it in the first place?

This is a guest post.

Getting out of debt is primarily a matter of changing your habits.   We’ve all heard people swear by skipping your morning cup of coffee to get rich, but that’s just a small habit.   Much more important are the big habits, the lifestyle habits.  Here are 5 habits to cultivate for financial success.

Frugality

“Beware of little expenses; a small leak will sink a great ship”– Benjamin Franklin

As Chris Farrel wrote in “The New Frugality“, being frugal is not about being cheap, but finding the best value for your money.  When my wife and I had our second baby, we couldn’t justify spending $170 on a breast pump, so we bought the $30 model.   It was quite a bit slower than the expensive model, and was only a “single action”, but for $140 of savings, it seemed worth the trade.   Six weeks later, it burned out so we bought a new one, still afraid to justify $170 on quality.   This thing took at least 45 minutes to do its job.  When it burned out 6 weeks later, we decided to go with the high-end model.   This beauty had dual pumps, “baby-mouth simulation” and it was fast.  The time was cut from a minimum of 45 minutes to a maximum of 15.   That’s 3 hours of life reclaimed each day fro $140. Six months of breastfeeding for each of two kids means my wife regained 45 days of her life in exchange for that small amount of money.   At the rate of 6 weeks per burnout, we would have gone through 8 cheap pumps, costing $240.   The high-end unit was still going strong when we weaned baby #3.  Buying quality saved us both time and money. I wish we would have gone with the good one from the start.  Sometimes, the expensive option is also the cheap option.

Maturity

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“Maturity is achieved when a person postpones immediate pleasures for long-term values.” -Joshua Loth Liebman

Being a mature, rational adult is hard.   It means accepting delayed gratification over the more enjoyable instant variety. We save for retirement instead of charging a vacation.  It takes a lot of restraint to put off buying the latest toys, clothes, gadgets,  cars or whatever else is currently turning your crank until you actually have the money to actually afford it.   It means planning your future instead of looking like a surprised bunny caught in a spotlight every time your property taxes come due.   (Who knew that the year changed every year?  Do they really expect annual payments annually?  Geez!  There’s so much to learn!)   It means thinking about your purchases and buying what you actually need, actually want, and will actually use instead of resorting to retail therapy whenever you feel like a sad panda.    The only benefit to mature, rational management of your finances is that, given time, you will have the security of knowing that, no matter what happens, you will be okay.   That’s a huge benefit.

Pleasure

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“Do not bite at the bait of pleasure, till you know there is no hook beneath it.” – Thomas Jefferson

If it hurts, you won’t do it.   You have to learn to take pleasure from from things that won’t make you broke and you have to learn not to hate putting off the things you can’t afford.    Take pleasure in the little things.  Enjoy the time with your family.  Presence means so much more than presents. So many people never learn how to enjoy themselves.  Take the time to experience life and enjoy doing it.

Update:  This post has been included in the Carnival of Debt Reduction.