Auto Insurance 101: Full Coverage is not the same as Good Coverage

Many, many times in my 18 years as a lawyer I have heard people say that they have “great” automobile insurance coverage because they were forced to buy “full coverage” when they took a loan out on a car.  However, “full coverage” is only half of the equation. 

The term “full coverage” usually means that a policy includes collision coverage.  Collision coverage will pay for damage to your car no matter who is at fault, so, if you run a red light and cause an accident, collision coverage will make sure that the lien holder on your car will get some money.  This amount may not be enough to pay off your loan, but that is another topic.

The fact is, in Oregon, full coverage simply means that a policy has some collision coverage.

Full coverage describes the type of insurance bought.  Another issue entirely is the amount of coverage purchased.  The minimum policy coverage in Oregon (and thus, the cheapest) for liability and uninsured motorist coverage is $25,000 per person, $50,000 per accident.  This means that, if you cause an accident, your insurance company will protect you UP TO A TOTAL of $25,000 per injured person, or UP TO A TOTAL of $50,000 per accident.  If you cause damages in excess of these amounts, you will have to pay the extra.

Personal injury protection coverage pays for your own medical expenses if you are in an accident, up to a maximum of only $15,000.

These minimum policy limits were set by the Oregon Legislature at a time when medical expenses were a small fraction of what they are today.  The statutory limits have not kept up with the rising costs of health care.  Today, a trip on Life Flight can easily cost $15,000 to $20,000, wiping out your entire PIP policy.  A serious injury can result in a hospital stay costing tens of thousands, or even hundreds of thousands of dollars.

As most drivers have a minimum policy, it becomes clear how important it is to protect yourself.  Thankfully, you can protect yourself through uninsured and underinsured motorist coverage.  Underinsured motorist (UIM) coverage is insurance coverage that you buy on your own policy, and requires your insurance company to pay for the difference between the at fault driver’s liability policy (often $25,000) and your own UIM limits.  For example, if you are hit by someone with a minimum policy of $25,000, and you have purchased $100,000 of UIM coverage, after the at fault driver’s insurance company has paid its $25,000, your own insurance company will provide an additional $75,000 in coverage, to bring your total coverage to $100,000.

UIM coverage is some of the most important and least expensive coverage that you can buy.  The difference in premium between a $50,000 UIM policy and a $300,000 UIM policy is often fairly insignificant.  However, in the event of an accident, this extra coverage becomes extremely important.   I cannot count the number of cases that I have handled in which a good UIM policy makes all the difference to the victims of a horrific accident.  A policy with minimum or low limits, even if it is a “full coverage” policy, can leave a family financially ruined.

Talk to your insurance agent and make sure that you are protected.