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UPDATED: Aug 1, 2019
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Anyone who has ever spent any time looking over an auto insurance policy knows that it can be quite confusing. There are so many different parts to the policy, and they all do different things.
Some parts are required and some are optional. How do you know whether you need the optional ones?
For instance, what is PIP and do I need it? Does my state require it? Can I do without it? Keep reading for answers to these questions.
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What is PIP insurance?
PIP stands for “personal injury protection.” PIP auto insurance coverage will pay for any medical expenses coming as a result of a traffic accident that is your fault.
It will cover you and any passengers in your vehicle, even if they aren’t related to you or on the policy. It would also cover any pedestrians involved in an accident in most cases.
PIP coverage pays for things like ER bills, hospital bills, x-rays, doctor bills, prescriptions, physical therapy, surgery, and more.
PIP also covers a few things that aren’t strictly medical in nature such as compensation for any wages you might lose due to the accident, house or yard care that you can’t perform while recovering, or funeral expenses.
When you purchase PIP auto insurance coverage, you can decide on the limit. For example, if you have a $10,000 PIP policy, it will cover up to $10,000 of the expenses stated above for each person in your car per accident.
Besides a monetary limit to what PIP will pay, there are also a few instances when it doesn’t apply. Personal injury protection usually won’t apply if you are not in a road vehicle.
In other words, farm equipment, RVs, mopeds, and motorcycles are usually excluded. If you are committing a felony when you have the wreck, you will also not receive any PIP benefits.
States that Require PIP
So who needs PIP? Well, if you live in one of about 15 states, you do because it’s the law.
Many states are requiring their drivers to carry PIP to reduce the financial burden on the health care system when people without health insurance are injured in car accidents.
Other states require PIP because they have adopted a no-fault approach to car insurance. States like Florida require you to carry liability to pay for the damage to the other driver’s car when you have a wreck.
However, when it comes to medical expenses in Florida, each driver’s own personal injury protection is required to pick up the bills, no matter who caused the accident.
Some of the states that require PIP but allow drivers to opt out of it in writing.
If you aren’t sure what your state requires, go to the website for your state’s department of insurance or department of motor vehicles and find out.
PIP is Not Health Insurance
Even if PIP is optional in your state, if you don’t have health insurance, you should seriously consider carrying it on your car insurance policy.
The World Health Organization reports that in 2004 over 50 million people were injured in car accidents all over the world.
Car accidents happen every day, so the chance of getting injured in one is higher than in almost any other activity.
If the other driver caused the accident, then his liability insurance will pay for your expenses. What if the accident is your fault? Even extremely safe drivers have accidents occasionally.
If you don’t have health insurance, how would thousands of dollars of medical bills affect your life and your finances? If you missed work because of your injuries, could you afford to go without the wages?
If your answer is no, you should probably be carrying personal injury protection. PIP is relatively inexpensive and can save you thousands in the event of an accident.
There are times you need PIP even when you do have health insurance. If you have a high deductible plan, you should look at PIP. Personal injury protection acts as primary insurance.
If you are buying an individual health insurance policy (rather than a group policy from an employer), PIP is a good idea.
Since a major car accident can result in high claims, this could cause your health insurance rates to go up the next year, as you could be seen as a higher risk. Utilizing PIP can help keep you health insurance bills down.
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If you live in a state that requires PIP but allows you to waive it, you will have to sign a form stating that you understand the financial ramifications of driving without PIP coverage.
If you are in a state in which PIP is completely optional, all you have to do is tell the agent you don’t want it.
Some financial advisors suggest that you only decline it if you have excellent health insurance that will cover injuries stemming from a car accident, disability insurance, and life insurance.
Most health insurance policies will cover expenses from auto accidents, but be sure to call and ask before you decide to drop PIP insurance. Your deductibles, copays, and coinsurance amount still apply.
Remember that PIP covers more than just medical expenses.
PIP covers lost wages during recovery as well, though it is usually 80% of what you would have earned.
Short-term disability insurance also pays you while you are out with illness or injury. Of course, life insurance money can be used to cover funeral expenses, something that PIP also does.
Keep in mind that if you drive with non-family members in your car frequently that PIP will cover their expenses, while your health and short-term disability insurance will not.
If you are involved in a carpool or other activity that has passengers in your car frequently that aren’t in your family, you might want to reconsider declining PIP.
PIP vs. Medical Payments
There are actually two different types of medical coverage you can buy through your car insurance policy. In addition to PIP, there is also something called medical payments, or med pay for short.
Unlike PIP, med pay only pays for medical bills. It doesn’t pay for lost wages, funeral expenses, or services.
However, like PIP, med pay will cover you and anyone in your car no matter who caused the accident.
While some states require you to buy PIP, other states require you to have med pay. Med pay can sometimes be a bit cheaper since it doesn’t provide as many benefits. It will cover the expenses up to the amount you determine when you buy the policy.
Also like PIP, med pay acts as primary coverage, which means it could cover your health insurance deductibles and co-insurance.
What Happens After an Accident
If you are involved in an accident and are injured, or someone in the vehicle is injured, take care of the injuries first. Make sure everyone is safe and that an ambulance has been called.
If the accident was your fault, be sure to give the hospital or doctor’s office your health insurance information but explain that your PIP will be your primary insurance. The billing office will help you navigate through the process.
While some offices might bill the insurance company directly, sometimes you’ll have to submit the bills to your auto insurance company yourself. Once you file this claim, they will send you the money to pay the bills.
The Rocky Mountain Insurance Information Association says that there are a few things NOT to do after an accident. First, they say not to apologize for the accident or admit fault. Let the police and insurance investigators determine that.
Also, don’t accept money or agree to forget the accident. If you accept any compensation from the other driver at the time, you’re giving up any right to file a claim against them later. On your end, never reveal how much insurance you have.
The Rocky Mountain Insurance Information Association also provides a free flowchart explaining the process of filing a claim for injuries after an accident.
Being in an accident is scary. Knowing that you have the insurance to take care of all the doctor’s bills will make a difficult situation a little more bearable.
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