How Much Auto Insurance Coverage Should I Have?

How much car insurance should you carry to be fully protected?

As a lawyer who has practiced both as an insurance defense attorney, and as a personal injury attorney, I’m often asked my opinion as to how much automobile insurance a person should have.  The quick answer is $100,000/$300,000 with $100,000 in Personal Injury Protection (PIP) coverage.  I will explain in detail below.

Here is a great guide for selecting the right insurance company for your coverage.

The Minimum:

Oregon’s financial responsibility law requires that Oregon drivers carry a minimum of $25,000/$50,000 in automobile insurance.  Oregon law also requires that every automobile insurance policy issued in this state must come with $15,000 in PIP coverage (Most people do not even know they have PIP coverage).

PIP (see my PIP blog) provides medical benefits, wage loss benefits, funeral costs, and essential services in certain situations.  PIP is provided through your own insurance carrier and is primary.  This means it should cover medical treatment first, even before health insurance.

Insurance policies come in different forms.  You can buy a single limit i.e. a $100,000 single limit policy, or as I recommend, a $100,000/$300,000 policy.  The first number i.e. $100,000 means that is the most the insurance company will pay on any claim for any one person.  The second number i.e. $300,000 represents the most the insurance carrier will pay on any claim no matter how many people are involved.  So, if two people are equally injured in an auto accident and the at-fault driver has $100,000/$300,000, the most each could recover is $100,000, or $200,000 total.  If there are six people equally injured, the most the insurance carrier would pay could be $50,000 each, or $300,000 total.

Generally, insurance companies make the bulk of their money on the minimum coverage.  Interestingly enough, the cost to double or even quadruple your limits is surprisingly low.  If you have minimum coverage, call your insurance agent and ask how much the extra coverage would be.  Shocking huh?

Why Should I Carry Two or Four Times What Oregon Law Requires?

There are two main reasons to increase your automobile insurance coverage.  First, if you seriously injure someone, you could end up owing more than $25,000.  If you have any assets, the injured person could sue you and seek an excess judgment.  That means your insurance would pay the first $25,000 and you would be responsible for anything above that.

The second reason is that there are a lot of uninsured drivers out there.  Generally, you have uninsured and underinsured motorist coverage on your car.  The limits that you can recover on uninsured/underinsured claims generally are the same as the liability insurance you purchased.  So, if you get hit by an uninsured driver and you only have the minimum of $25,000/$50,000, you will not be able to recover more than $25,000 from your own insurance carrier.  It makes no difference if your medical bills are more than this amount.  Insurance is a contract and you get what you pay for.

Following up on that example, let’s say a driver carrying the minimum policy limit hits you and you have $50,000 in medical bills.  If you took my advice and purchased $100,000 worth of automobile coverage, here is how it would play out.  You could recover $25,000 from the at-fault driver.  That would pay about half your medical bills.  Then you could make a claim for underinsured motorist benefits under your own policy.  Oregon law allows your automobile insurance carrier to get a credit for what you already received from the at-fault driver, leaving $75,000 available.  After the remaining $25,000 in medical bills are covered, you would be left with $50,000 that you could possibly recover from your insurance carrier.

$100,000 in PIP

PIP is particularly important if you do not have health insurance.  PIP is a no-fault type of insurance.  This means that even if you cause the automobile accident, PIP will pay your accident related medical expenses, up to the amount of benefits you purchased, so long as they are reasonable and necessary.  As you probably know, medical costs are pretty high nowadays.  A surgery or several nights stay in a hospital can lead to high medical bills.  If you have $15,000 minimum PIP coverage, you may be responsible for the outstanding medical expenses, out of pocket.

Another reason to increase your PIP limits is that PIP is primary.  Again, that means PIP pays before any other insurance, including health insurance.  Generally speaking, PIP covers all accident related medical treatment.  On the other hand, health insurance carriers often refuse to cover certain types of treatment and certain procedures.

Remember, it is up to you to make sure you and your family are adequately insured in case of an accident.  Oregon only requires that drivers carry $25,000/$50,000, which is often not enough to cover the damages.  You cannot count on the at-fault person to cover your losses.  First, you should assume that most at-fault drivers are underinsured.  Second, you should assume that they will not have enough assets to cover anything above what is provided by their insurance carrier.  Raise your limits today to protect yourself and your family.