Unless you live in a No-Fault state now or have lived in one in the past, you’ll likely not have a clue about Personal Injury Protection or PIP Insurance.
Personal injury protection insurance coverage was originally designed to help reduce the number of car accident lawsuits which were overwhelming many jurisdictions in the U.S. The purpose of the coverage was to reduce personal injury lawsuits resulting from claims less than $10,000.
The state legislatures that climbed aboard the no-fault platform has grown significantly since its origination. Today 15 states are designated “no-fault” plus the District of Columbia and Puerto.
|New York||North Dakota||Oregon|
It’s important to note that although the District of Columbia, Delaware, Maryland, and Oregon require insurance companies to offer PIP in their jurisdiction, car owners can elect to waive the coverage.
In each of these states, vehicle owners are required to purchase PIP insurance (first-party coverage) along with liability insurance (third-party coverage). To make matters a little more confusing, each of these states has different minimum coverage requirements and they control the coverages provided in Personal Injury Protection (PIP).
In our attempt to keep this article manageable in terms of page count, we are going to discuss the top 5 questions regarding PIP insurance.
1. What is PIP Insurance?
PIP is a first-party coverage (it covers the insured driver) that will pay for medical expenses and other related expenses if you are injured in a car accident. PIP pays no matter who is at fault. It will also offer coverage for passengers in your vehicle as long as they do not have access to their own PIP coverage.
As we discussed in the introduction, PIP was developed for “no-fault” states to reduce the number of personal injury lawsuits resulting from car accidents.
2. What does PIP Cover?
In most no-fault states, PIP will help pay for medical expenses, lost wages, and funeral expenses. In some states, household services are covered as well. These would be normal services that the insured is unable to do while recovering from their injuries such as laundry, lawn maintenance, or even meal preparation.
3. Are there Limits and Deductibles Under PIP Coverage?
The limits and deductibles are specified by each state’s department of insurance and can vary among the 15 states that require PIP.
For example, in Florida, typical PIP coverage is limited to $10,000 in coverage. Each benefit will also contain a coinsurance percentage that can limit what an injured driver can collect. In Florida, PIP will typically pay 80% of an insured’s medical expenses and is subject to any deductible selected by the policyholder.
Your coverage would also pay 60% of your lost wages if you cannot work but that amount is also subject to the $10,000 limit of coverage. If you are unable to perform certain household chores you will also have coverage to pay a service company to perform them for you.
Finally, the Florida PIP coverage will also pay $5,000 in funeral costs to your next of kin if your accident causes your death. The funeral benefit is not subject or included in the $10,000 limit.
A Florida policyholder can elect a deductible up to $1,000 for PIP benefits and exclude the lost wages benefit if they wish to reduce their cost for coverage.
Kansas, for example, requires different limits and coverage for PIP insurance sold in that state. In Kansas, PIP coverage is as follows:
- Limit of $4,500 per person for medical expenses
- $4,500 for rehabilitation expenses
- $900 per month for loss of income due to disability resulting from an accident
- $25 per day for household expenses
- $2,000 for funeral and burial expenses
At the complete other end of the coverage scale is the state of Michigan. Michigan policyholders have access to unlimited payment for medical expenses, $5,189 per month for lost wages, and $20 per day for household services.
If you are newly licensed or have recently moved to a state that requires vehicle owners to carry Personal Injury Protection, you can visit your state’s Department of Insurance website to learn more about how PIP works where you live.
4. Is PIP insurance similar to Bodily Injury Liability?
When it comes to car insurance, the coverages you select are either first-party or third-party. First-party simply means that the insurance covers you and your vehicle. Third-party means that your auto insurance company covers a third-party or a third party’s property. PIP is first-party coverage and liability does not have to be established to collect benefits.
Bodily Injury is third-party coverage and therefore liability must be established for your insurer to pay the third-party who is filing the claim against your insurance policy.
5. Should I carry Med Pay in addition to PIP?
Although Med Pay is first-party coverage like PIP, Med Pay does not cover many of the additional expenses that PIP does cover. Knowing this, if you live in a state that requires PIP or offers it as additional coverage, Med Pay could be considered redundant.
For example, in Michigan, there is no limit on medical expenses under PIP coverage so Med Pay would likely be considered redundant. Additionally, it’s important to note that individual or employer-sponsored health insurance could also pay for injuries on top of your auto insurance.
However, in states like Florida where PIP has lower limits and coinsurance requirements, Med Pay could be used to fill the gaps in your PIP coverage and extend your maximum PIP benefit.
The Bottom Line
In states where PIP insurance is required, policyholders have little input about purchasing this coverage. Your cost for PIP will depend on the state you live in and whether deductibles can be selected. In Florida for example, PIP can be rather costly so asking for the maximum allowable deductible and deleting the loss of income benefit can have a considerable impact on your premium.