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UPDATED: Dec 8, 2016
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Personal Injury Protection (PIP) is a common add on to auto insurance policies. This feature provides coverage that helps pay for medical or funeral costs resulting from an automobile accident. While PIP is optional in some states, many make it mandatory.
If you live in a state that requires PIP coverage, you don’t have a choice of whether or not to carry this insurance. However, you may be able to vary the level of coverage that you choose. You should also understand the ramifications that Personal Injury Protection insurance has on your premiums and your policy.
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PIP Insurance Explained
Personal Injury Protection (PIP) insurance is designed to specifically cover medical bills, funeral costs, and other costs incurred as a specific result of injuries sustained in an automobile accident. PIP insurance typically covers the policyholder, but may also extend to passengers and pedestrians.
Most auto insurance policies focus on covering physical and mechanical damage to vehicles, as well as property damage caused by a vehicle or an automobile accident. This coverage does not always extend to include the health and wellness of the passengers in the vehicle. However, injuries are often incurred in automobile accidents.
However, injuries are often incurred in automobile accidents.
If you or your passengers do not have health insurance, Personal Injury Protection coverage can be especially valuable.
Medical bills resulting from a car accident can often total into the tens of thousands of dollars.
PIP insurance is also sometimes referred to as no-fault insurance or Auto Medical Payment (AMP) coverage. These terms are interchangeable. PIP is not a separate auto insurance policy; it is a particular part of your existing coverage.
Many States Require PIP Insurance
Currently, PIP insurance is required in the states of Delaware, Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Oregon, Pennsylvania, and Utah.
In Maryland, Texas, and Washington, Personal Injury Protection coverage is required unless the driver signs a waiver at the time of policy purchase. This is also called an exclusion agreement.
This waiver states that the driver understands and agrees with the fact that there will be no Personal Injury Protection coverage provided by their policy, and that they will be liable for the cost of any injuries sustained in an automobile accident, if applicable.
Personal Injury Protection insurance is a fairly hot topic in the insurance world right now. While your state might not currently require PIP coverage, that could change shortly. You should stay up to date on insurance regulations in your state to understand if PIP coverage could be an issue for you in the future.
PIP Insurance Offers Different Levels of Coverage
The scope and coverage level of PIP insurance often varies from policy to policy, based on the specifics offered by the insurance company. If your state requires Personal Injury Protection coverage, there is a certain minimum level that must be met.
Beyond that, you can adjust the coverage level as you desire.
If you do not have health insurance, you are most at risk of needing a PIP policy to cover potential medical expenses resulting from an accident.
In such cases, you may want to consider purchasing coverage significantly over and above the minimum levels required by your states. The minimum coverage mandated by states tends to vary widely.
However, if you do have a comprehensive health insurance policy, you will want to compare it to the benefits offered by PIP insurance. In many cases, the coverage is duplicative, so you would not need to retain any more than the minimum required Personal Injury Protection insurance.
PIP Insurance May Not Cover Everything
Personal Injury Protection insurance is designed to help cover the costs of medical and funeral bills resulting from auto accidents. However, you should be aware that there are certain costs that your plan will not cover.
Personal Injury Protection covers the policyholder or driver and may cover passengers. It may or may not cover pedestrians. These factors are determined by your specific plan.
PIP covers most medical costs related to an accident up to a certain amount.
This may include bills for hospitalization and surgery, among other things. Certain treatments, like mental health treatment and alternative treatments such as acupuncture and massage, may not be covered depending on your plan details.
Some Personal Injury Protection plans even go beyond medical bills to cover expenses such as loss of wages. This would replace your lost income if you were unable to work for a period due to injuries from an automobile accident. This is not standard in all PIP plans.
What is and is not covered by PIP will vary from state to state and plan to plan. You should consult your insurer for comprehensive details on what is and is not included in your specific Personal Injury Protection plan.
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PIP Insurance Costs May Differ
The cost of PIP insurance is determined by several factors. This includes the state you live in and the level of coverage that you choose. Just like regular automobile insurance, your driving history and risk factors contribute to how much you pay for PIP insurance.
If the insurer deems you at high risk of having an accident, you will pay more for Personal Injury Protection.
Factors that can contribute to this include multiple speeding tickets, a history of accidents, or a major negative on your records such as a DUI or DWI. Being a young or inexperienced driver can contribute to a higher cost of PIP insurance.
Your insurer can give you a specific breakdown of how much your PIP plan is adding to the cost of your policy. In some cases, PIP insurance can cost up to $100 per month or more. This is especially true in areas where PIP fraud is high. However, the average rate is much lower.
PIP Claims May Increase Premiums
Having a claim on your PIP insurance can contribute to a rise in your insurance premium. A history of prior accidents makes the insurer view you as more likely to be a future risk.
Like with other types of automobile insurance, such as collision, having one incidence of a claim can give your insurer statistical cause to raise your premium.
How much your insurance premium rises as a result of a PIP claim is dependent on your provider, the size and type of your claim, and your other existing risk factors.
According to the Insurance Information Institute, your insurer will usually increase your premium by a certain percentage based upon the dollar value of the claim, over a certain amount.
Your Health Insurance Policy May or May Not Provide Sufficient Coverage
If you have a comprehensive health insurance policy, it may cover many of the same expenses as Personal Injury Protection insurance.
In fact, you may even find that your health insurance provides better coverage. Moreover, unlike PIP, your health insurance premiums will not rise if you make a claim.
Unfortunately, if you live in a state that makes Personal Injury Protection coverage mandatory, it will not matter if you have duplicative coverage. You will still be required to purchase the insurance through your automobile insurance provider.
Some of the Drawbacks of PIP Insurance
Personal Injury Protection insurance can provide valuable coverage to individuals who would otherwise be unable to pay the medical bills associated with a serious automobile accident.
PIP coverage is especially valuable for those who do not have health insurance. However, there are some drawbacks to this coverage.
The number one drawback to PIP coverage is the cost.
Personal Injury Protection insurance, especially in certain states, can be very high. The reason for this is the high likelihood of fraud being committed, which contributes to raising premiums across the board.
Criminals have been known to stage accidents to submit phony PIP claims. This costs insurers hundreds of thousands of dollars, which is then passed on to consumers in the form of rising auto insurance premiums.
It was recently found in Florida that PIP fraud contributed to an additional $58 per month in premiums paid by Florida drivers.
Florida and New York are the two states that are currently experiencing the highest rates of Personal Injury Protection fraud. In fact, in New York the problem has been said to have reached crisis levels.
In fact, drivers in some areas in New York with major PIP fraud problems are paying more than four times the state average cost of automobile insurance!
Until lawmakers and officials can get a handle on the rampant fraud associated with Personal Injury Protection insurance, it is likely that premiums will continue to rise.
While this insurance offers valuable protection to some, for others it is a mandatory cost that contributes to making automobile insurance less affordable.
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