First-Party Benefits: Auto Insurance Basics Explained

First-party benefits are a type of auto insurance coverage that pays for medical expenses incurred due to illness or injury, regardless of fault. In the US, first-party benefits are mandatory in Pennsylvania, where they are known as first party benefits (FPB) or personal injury protection (PIP). In other states, they are optional. FPB/PIP covers medical costs, lost wages, funeral costs, and accidental death in the event of a car collision. The coverage extends to all members of the policyholder's household.

Medical payments coverage

MedPay is especially useful if you do not have health insurance or if your health insurance has a high deductible. It can help cover your out-of-pocket costs, such as your deductible, and give you peace of mind in case of unexpected medical expenses. Even if you have health insurance, MedPay can help cover any gaps in your health insurance coverage.

It's important to note that MedPay is not offered in every state, and the availability and limits may vary. In states that don't offer MedPay, Personal Injury Protection (PIP) coverage is usually available instead. PIP is similar to MedPay but typically has higher limits and covers lost wages and funeral costs in addition to medical expenses.

When deciding on the amount of medical payments coverage to purchase, consider your health insurance plan and whether it will cover all your medical costs in the event of a car accident. If not, MedPay can help fill in the gaps and ensure you're not left with a large financial burden.

To summarize, medical payments coverage is a valuable option to consider when purchasing auto insurance. It provides financial protection in the event of a car accident, ensuring that you and your passengers can receive the medical care you need without worrying about the cost.

Extraordinary medical benefits

In Pennsylvania, if you require more than \$100,000 in medical payments coverage, you can purchase extraordinary medical benefits coverage of up to \$1,000,000. This is an optional coverage that you can add to your auto policy.

Pennsylvania is the only state that requires you to buy first-party medical benefits as part of your car insurance policy. The Pennsylvania Insurance Department mandates a minimum of \$5,000 in medical benefits coverage, but higher limits are available. If you insure more than one car on your policy, all vehicles must carry the same limits on first-party benefits medical coverage.

First-party benefits coverage is important because it ensures that you and your family receive compensation for medical expenses, regardless of who is at fault in an accident. This can be especially useful if the at-fault party cannot cover your injuries. Without this coverage, you may have to pay out of pocket for your medical bills or rely on health insurance, which may have a high deductible.

In summary, extraordinary medical benefits coverage is an optional extension of first-party benefits coverage, which can provide valuable financial protection in the event of an accident. It allows Pennsylvania residents to increase their medical benefits coverage beyond the standard limit of $100,000, up to a maximum of $1,000,000.

Work loss coverage

In Pennsylvania, you need to purchase work loss coverage separately from the medical benefits part of your first-party benefits. If you choose to buy this coverage, you are covered up to the limits you purchase. You will be entitled to 80% of your weekly earnings, until you reach your policy limits. So, if you make $1,200 a week, your first-party benefits would pay you $960. If you select $5,000 worth of coverage, you would be covered for about five weeks. This benefit also covers a "reasonable" amount—usually $12 to $30 per day—for household expenses, such as cleaning services and snow shoveling.

In some states, you can buy optional work loss coverage to extend loss of income benefits you already have under your PIP coverage or exclude the coverage. For example, in Florida, you can pay more to get additional coverage that will bump your work loss benefit up to 80% and raise your total PIP coverage from $10,000 to $20,000.

Accidental death benefit

An accidental death benefit is an optional coverage that pays for the death expenses of you or a covered family member in the unfortunate event of a covered auto accident-related death. This benefit is designed to provide financial support to the family of the deceased by covering various end-of-life expenses.

The specific benefits provided depend on the terms of the policy. In Pennsylvania, for example, the accidental death benefit can provide up to $25,000 to the family of the deceased. This monetary benefit can be used to cover funeral and burial expenses, medical bills incurred before death, and loss of wages up until the day of death.

The steps to claim an accidental death benefit vary by insurance company but generally include contacting the insurance agent, filing the claim, providing the necessary documentation, and proving your relationship to the deceased. It is important to note that these policy riders often have a time limit, and certain circumstances, such as suicide, crime, or dangerous activities, may exclude an accident from coverage.

Funeral benefit

In the unfortunate event of a death following a car accident, funeral benefits can help reimburse the deceased's family for funeral costs. In Pennsylvania, for example, funeral benefits are optional and can be purchased in addition to first-party benefits-medical insurance, also known as personal injury protection (PIP) or first-party benefits (FPB). This is called a first-party benefit-combination package benefit (FPB CPB). The funeral benefit provides a monetary benefit of at least $2,500 and up to a maximum of $5,000 to cover funeral costs. If the policyholder is the deceased, their next of kin or household members will receive the benefits.

In Oregon, while not specifically called out as a first-party benefit, the minimum PIP coverage of $15,000 includes funeral benefits. This means that, regardless of who was at fault in the accident, the insurance will cover funeral costs, in addition to medical bills and loss of income.

It is important to note that funeral benefits are separate from accidental death benefits, which are also optional and provide a monetary benefit to the deceased's family in the event of a covered driver's death in an auto accident.

Frequently asked questions