Why Is Personal Injury Protection (PIP) an Important Coverage?

Personal injury protection covers the insured's medical expenses.

Personal injury protection (PIP), sometimes called MedPay and "no-fault" protection, is important coverage because it covers the insured's personal medical expenses, lost wages and, in many instances, even a death benefit arising from a car accident. Many states have "no-fault" insurance laws that require the insured to carry PIP in addition to liability coverage.

Significance of Personal Injury Protection Coverage

PIP compensates regardless of fault

PIP coverage compensates for bodily injury regardless of who is at fault. It covers the insured, relatives who live in the home and passengers without PIP coverage for "reasonable and necessary" medical and hospital expenses. The "reasonable and necessary" phrase is found in most policies to provide the carrier with flexibility. PIP can also help defray other expenses while the insured is on the mend. These "other" covered expenses will vary state to state, but can include loss of income and child-care expenses.

How PIP Works

Lawyers prosper on personal injury lawsuits

PIP works like liability coverage with minimum limits and is not subject to a deductible. Depending on the carrier, PIP coverage limits are typically low, in the $10,000 to $20,000 range, and come with numerous restrictions. PIP is not the cheapest of insurance coverage, but the cost can be kept at a manageable level by selecting a low minimum. Despite having a low limit, it is unwise to waive the coverage completely, because the consequences of not having the coverage can be overwhelming for the average family. This fact must be viewed in light of the surfeit of trial lawyers prospering on personal injury lawsuits having modest settlements. Therefore, it is better to have it, even at a minimum level, than not have it at all.

States That Require Personal Injury Protection

PIP is optional coverage in many states, thereby giving the insured the opportunity to waive the coverage. However, it is required coverage in several states. The following states require PIP: Arkansas, Delaware, Florida, Hawaii, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Oregon, Pennsylvania and Utah.

How Much PIP Coverage Is Adequate?

PIP should be viewed relative to the limitations of the insured's health insurance coverage, as PIP is an adjunct to health insurance. Key considerations are heath insurance deductibles and co-payment requirements that can erode savings. People with "blue chip" health insurance may want to opt for the lowest allowable minimum coverage. Budgetary constraint is always the limitation. The insured should buy as high a limit as his budget permits to compensate for any deficiencies in his health insurance policy.

Automatic PIP Coverage

Check with the insurance agent about specific state PIP mandates.

Some states such as Texas mandate that PIP be included in the liability policy or as a supplement to the liability policy unless the insured specifically signs a waiver to exclude the coverage. If uncertain about the PIP mandates for a given state, check with the insurance agent that sold the policy to determine if PIP coverage is included and the amount of the coverage.

References

• Bank Rate: Car insurance basics
• Edmunds: How Much Car Insurance Do You Need? (home page)