How Much Auto Insurance Do I Really Need?

Start with the right question

Most people ask, “What is the cheapest amount of insurance I can buy?” A better question is, “What could I afford to lose if I caused a serious crash?” Those questions can lead to very different policies.

Oregon’s required limits are the legal starting line. Your own limit should reflect your income, savings, property, driving habits, and the people who depend on you.

What Oregon requires

For a typical personal vehicle, Oregon requires liability limits of $25,000 for bodily injury to one person, $50,000 for bodily injury in one crash, and $20,000 for damage to other people’s property. Oregon also requires $15,000 of personal injury protection per person and uninsured motorist bodily injury limits of $25,000 per person and $50,000 per crash.

You will often hear the liability portion shortened to 25/50/20. That is easy to remember, but it is also easy to overestimate how far those dollars will go.

• $25,000 is the most the policy would pay for one injured person under that bodily injury limit.
• $50,000 is the most it would pay for everyone injured in one crash under that limit.
• $20,000 is the most it would pay for other people’s damaged property under that limit.

A simple three-car example

Imagine that you slide through an intersection and damage two newer vehicles. The combined repair bill is $46,000. With Oregon’s minimum $20,000 property damage limit, there could be $26,000 left after the policy limit is used.

Insurance does not make the remaining amount disappear. The people or companies that paid for the damage may seek the difference from the at-fault driver. Higher limits give your policy more room to handle a bad day before your personal finances enter the conversation.

How I think about liability limits

There is no single perfect number for every driver. I usually look at the whole household instead of only the car. Someone with a home, steady income, savings, or a young driver in the family may have more to protect than the minimum limits recognize.

I also look at exposure. A long daily commute, frequent highway driving, multiple household drivers, business use, and regularly carrying passengers can all change the conversation.

• Choose a bodily injury limit that makes sense beside your income and assets.
• Make sure the property damage limit reflects what newer vehicles and multi-car crashes can cost.
• Ask whether an umbrella policy would add a useful layer above your auto and home liability limits.
• Keep the same liability limits on every household vehicle when practical so there are fewer surprises.

Do not overlook uninsured and underinsured drivers

Liability coverage protects other people when you are responsible. Uninsured and underinsured motorist coverage helps protect you when the responsible driver has no insurance or not enough of it.

You can be a careful driver and still be injured by someone carrying low limits. I like to compare uninsured motorist limits with liability limits instead of treating them as an afterthought.

What about your own vehicle?

Collision and comprehensive coverage protect the vehicle itself, subject to the policy terms and deductible. A lender usually requires both while a vehicle is financed or leased. If the car is paid off, the decision becomes a math and comfort question.

Ask what the vehicle is worth, what you still owe, and whether you could replace it tomorrow without creating a financial problem. If losing the car would derail your budget, dropping physical damage coverage just to save premium may be a poor trade.

A useful way to decide

Put three numbers on paper: the amount you could comfortably pay after a crash, the value of the vehicle, and the amount of income or savings you want protected. Then compare those numbers with the policy limits and deductibles.

The goal is not to buy every available option. It is to avoid saving a modest amount today by accepting a risk that would be painful later.