Maximizing Auto Insurance: Understanding Medical Portion Premiums

Medical payments coverage (Med Pay) helps pay for medical and funeral expenses incurred by the policyholder, passengers, or family members in the event of an auto accident, regardless of who is responsible. While most states do not require Med Pay, it is a valuable addition to your auto insurance policy, especially if you have health insurance. Unlike health insurance, Med Pay has no deductibles or co-payments and covers expenses from the first dollar, including chiropractic visits and ambulance rides. In Michigan, this coverage is called Personal Injury Protection (PIP) and allows drivers to choose a coverage level that suits their needs and budget. To deduct the medical portion of your auto insurance premium in Michigan, you must follow specific steps in your tax return, including answering questions about your household resources and qualifications.

Personal Injury Protection (PIP)

PIP covers the medical expenses from an accident for anyone in the policyholder's vehicle, regardless of who is at fault. It also covers medical expenses for third parties if the policyholder is at fault. PIP is required in 15 states and Puerto Rico, including Delaware, Florida, Hawaii, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Oregon, Pennsylvania, Utah, and Puerto Rico.

PIP policies have a minimum coverage amount and a per-person maximum coverage limit. If the cost of necessary medical care exceeds the auto insurance policy's PIP limits, health insurance sometimes covers further expenses. PIP coverage, in addition to making medical care affordable, often provides payments for lost income, childcare, and funeral expenses related to the accident.

Under Michigan's new auto insurance law, auto insurance companies are required to reduce statewide average PIP medical premiums for eight years. Drivers may choose a coverage level appropriate for their needs and budget. If drivers choose to opt out of PIP medical, the entire PIP medical portion of their premium will be eliminated, but excluded members will have no PIP medical coverage under the policy.

Medical Payments Coverage (Med Pay)

Medical Payments Coverage, also known as MedPay, is an optional add-on to an auto insurance policy that covers medical expenses related to vehicular accidents. It covers the policyholder, any passengers in their vehicle, any pedestrians they may injure, and the policyholder if they are injured as a pedestrian, bike rider, or public transportation rider. MedPay is supplemental to your regular health insurance and is useful in situations where you did not drive responsibly, as it will cover your own medical expenses even if you caused an accident due to alcohol or drug use.

MedPay applies to a range of expenses related to injuries resulting from an automobile accident, including health insurance deductibles and co-pays, visits to a doctor or hospital, X-rays and surgery, ambulance and emergency medical technician fees, rehabilitation and nursing care, and some medical equipment such as prostheses. It is important to note that MedPay does not cover lost wages, medical expenses not related to the car accident, or replacement services for tasks you cannot perform due to injuries, such as housekeeping or childcare.

The amount of MedPay coverage you purchase represents the maximum amount available to each person covered under your policy. For example, if you buy $2,000 of MedPay coverage and you and your passenger are injured in a car accident, you will each have up to $2,000 in MedPay coverage. MedPay is usually sold in small amounts, typically ranging from $1,000 to $5,000, and the cost increases with higher coverage limits.

MedPay is available in most states and is required in Maine and New Hampshire. It is an affordable option, often costing less than $10 per month, and it ensures that medical bills for you and your passengers will be covered quickly after a car accident, regardless of fault. Even if you have health insurance or personal injury protection (PIP), MedPay can fill coverage gaps and reimburse you for out-of-pocket expenses.

Bodily Injury Coverage

Bodily Injury Liability Coverage (BI) is a critical component of your auto insurance policy, providing protection if you're at fault for a car accident that results in injuries to others. It is one of the coverages mandated by most states and is typically included in standard car insurance policies. However, it's always a good idea to verify that your policy includes BI coverage.

Bodily Injury Liability Coverage helps pay for the medical expenses of those injured in an accident caused by you. While it primarily safeguards other motorists and pedestrians from financial burden, it also protects you from having to pay for damages out of your own pocket. This coverage is designed to pay for the medical costs of those harmed, including emergency care services and ongoing care costs.

In addition to medical expenses, Bodily Injury Liability Coverage can assist with legal fees if you are sued for damages. It can also help cover lost wages if the injured party is unable to work due to their injuries. This type of coverage usually has two limits: a per-person limit and a per-accident limit. For example, with BI limits of $100k/$300k, your insurance would cover up to $100,000 in medical expenses for one injured person and up to $300,000 total if four people are injured in the accident.

It's worth noting that most states have minimum Bodily Injury Liability requirements for vehicle registration. However, these state-mandated limits may not provide sufficient coverage. Therefore, it's recommended to assess your needs and consider higher coverage limits to ensure adequate protection.

Deductibles and co-payments

When it comes to auto insurance, a deductible is the amount of money you are responsible for paying out of pocket on a claim before your insurance company covers the rest. Unlike health insurance, there is no annual deductible to meet, and you are responsible for your policy's stated deductible every time you file a claim.

The most common deductible chosen by drivers is $500, but there is no wrong choice. Ultimately, it comes down to what you prefer: a higher deductible means a lower insurance rate, whereas a lower deductible means a higher insurance rate.

Deductibles are applied on a per-claim basis, and they are typically applied to two forms of coverage: collision coverage and comprehensive coverage. Collision coverage pays for damage done to your vehicle when you are in a crash with another vehicle or any stationary object, while comprehensive coverage pays for damage done to your vehicle in all instances other than a crash for which you are at fault.

It's important to note that liability and medical payments coverage don't typically have a deductible attached. Medical payments coverage, or Med Pay, helps pay for medical and funeral expenses when a covered person (the policyholder, passengers, or a family member) is injured in an auto accident, regardless of who is at fault.

No-fault law

In the state of Michigan, drivers can now choose from six PIP medical coverage levels that represent the maximum amount an insurance company will pay per person, per accident. These levels include:

• Up to $500,000 in coverage
• Up to $250,000 in coverage
• Up to $250,000 in coverage with PIP medical exclusion(s)
• Up to $50,000 in coverage (if the insured is enrolled in Medicaid)
• PIP medical opt-out (if the insured has Medicare)
• Unlimited coverage for medical expenses

Prior to July 1, 2020, all drivers in Michigan had unlimited coverage. Now, if a driver does not choose a PIP medical option, the unlimited PIP medical option is selected by default.

Florida is another state that follows a no-fault car insurance system. Florida requires a minimum of $10,000 in PIP benefits and $10,000 in property damage liability (PDL) benefits for any four-wheel motor vehicle registered in the state. PIP coverage in Florida also applies to the policyholder's children, members of the policyholder's household, and most passengers who lack their own PIP insurance.

It is important to note that no-fault/PIP claims have limitations. For example, you cannot receive compensation for "pain and suffering" and other non-monetary damages resulting from the accident. Additionally, no-fault systems typically do not apply to vehicle damage claims.

Frequently asked questions