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UPDATED: Nov 15, 2016
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A PIP waiver is an attachment to an insurance policy in states operating under a fault-based car insurance model. In such states PIP coverage is not mandated, giving individual drivers the option to secure this coverage or waive it all together.
In cases where drivers choose not to carry such coverage, a PIP waiver is attached to his or her auto policy. As you’ll discover from reading this article, such a waiver often has consequences that drivers may not always understand.
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What is PIP coverage?
PIP stands for “Personal Injury Protection.” It is insurance coverage that pays medical expenses and lost wages for you, a passenger, or a pedestrian, after an accident in a car that you are operating or riding in.
In some states, you have the right to direct how the PIP money is paid out, while in other states the law requires doctors and medical facilities be paid first.
As medical costs can be very expensive, many people choose to have Personal Injury Protection coverage on their policy to protect themselves and their assets in the case of an auto accident.
If you do not have Personal Injury Protection or have applied for and received a PIP waiver from your car insurance company, you will be responsible for all of the medical costs associated with the accident.
So, if your accident causes major injuries and you do not have PIP coverage, your personal assets such as your home and any money you have saved can be used to pay for the medical costs.
What are the benefits of waiving PIP coverage?
The only real benefit of obtaining a PIP waiver is a lower overall insurance premium. PIP coverage can be fairly costly, depending on the limits you choose, and many drivers feel that the benefits versus the cost make the coverage not worthwhile.
As an alternative, you can substitute more costly PIP insurance with cheaper med pay coverage. Med pay will not cover things like lost wages, but it will cover medical expenses at a lower cost than PIP.
What are the disadvantages of waiving PIP coverage?
Choosing to waive PIP coverage can cause you financial difficulty in a number of ways. First of all, waiving coverage on your own car means that if you are involved in an accident you may not have the insurance resources to pay medical costs incurred by anyone involved.
While this may not matter for you personally, passengers or pedestrians who are injured may seek to recover medical costs through litigation. Not having PIP insurance opens you up to personal liability in such litigation.
The second problem is one that most drivers are not aware of, and it involves being an accident victim while riding in someone else’s car.
For example, if you have elected to waive PIP coverage on your own car, and you are an accident victim while riding in the car of a friend, you still won’t be able to file a PIP claim against your friend’s insurance company. In other words, a PIP waiver is in effect across the board.
You either have the coverage for any and all accidents, regardless of car and driver, or you don’t.
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What are the typical amounts of PIP coverage on car insurance policies?
The standard amount of Personal Injury Protection coverage on the average policy for car insurance is $5,000. However, it is important to consider that medical costs can easily add up, especially if there is more than one person injured in the accident.
Most car insurance companies allow you to increase the amount of PIP coverage you have on your insurance policy. Since the PIP coverage may have to cover the hospital bills and the lost wages, you may decide that $5,000 is not enough coverage.
Increasing your PIP coverage to $10,000 or even higher may be worth the additional premium costs.
Getting a PIP waiver may not be worth the savings on your policy premium. It is best to speak to your insurance agent to determine the best options for you.
What if I live in a no-fault state?
Most drivers choose PIP because it provides substantially better coverage. Regardless, without such coverage, you would not be able to register your vehicle, let alone put it on the road.
It’s also not possible in these states to allow the PIP portion of your policy to lapse while the rest remains in place. PIP is bundled together with minimum liability requirements and remains in force as long as the rest of the policy is in force.
Once the policy is canceled or is allowed to expire, the PIP portion follows suit. Med pay coverage in no-fault states works the same way.
What if I’m self-insured?
There are a small handful of states that allow drivers to insure themselves if they can prove they have the financial resources to do so. Self-insured drivers file an SR-22 with their state as a demonstration of their ability to self-insure.
In such cases, it is sometimes possible to then purchase PIP coverage from a licensed insurance provider. The policy would be written in such a way that indicates you are self-insured for minimum liability while the policy will cover a certain amount of PIP claims.
Finding this type of coverage if is difficult, as not many insurance providers offer it. As the thinking goes, if you have the financial resources to self-insure against minimum liability, you probably also have the resources to cover personal injury claims.
If you’re unable to find PIP coverage under a self-insured model, it would be a good idea to include umbrella coverage in your homeowner’s policy. This will protect you against personal injury awards should you ever be taken to court after an accident.
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