Personal Injury Protection: Auto Insurance Explained

Personal injury protection (PIP) is a form of auto insurance that covers medical expenses and lost wages for the insured driver and their passengers in the event of a car accident, regardless of who is at fault. PIP is sometimes known as no-fault insurance and is mandatory in some US states, but not in others. In addition to medical costs and lost income, PIP can also cover household services, disability, and death benefits.

What does PIP cover?

Personal injury protection (PIP) coverage pays for the insured's medical care, lost wages, and other related expenses if they are hurt in a car accident. PIP insurance covers the policyholder and their passengers, regardless of who was at fault for the accident.

PIP insurance covers reasonable medical costs, including surgeries, medications, diagnostics (x-rays, CT scans, etc.), prosthetics, nursing care, physical therapy, and medical devices. It also covers rehabilitation therapy and funeral expenses. In addition, PIP insurance provides death and disability benefits, such as reimbursing lost wages and replacing necessary services normally provided by the injured party, like childcare or household maintenance.

The amount covered by PIP insurance is limited to the policy's limit, which could be lower than the total cost of medical bills and lost wages. For example, if the combined cost of medical expenses and lost wages is $20,000, and the PIP coverage limit is $5,000, the insurance will only reimburse up to $5,000. In such cases, the insured would need to turn to their medical insurance, disability insurance, or the at-fault driver's liability insurance policy to cover the remaining expenses.

When is it mandatory?

Personal injury protection (PIP) is mandatory in 15 US states. Of these, 12 states require PIP as part of "no-fault insurance" laws, which mean that drivers must file a claim with their own insurance company after an accident, regardless of who caused it. The 12 states are:

• Delaware
• Florida
• Hawaii
• Kansas
• Kentucky
• Maryland
• Massachusetts
• Michigan
• Minnesota
• New Jersey
• New York
• North Dakota

The remaining three states that require PIP but do not have "no-fault insurance" laws are:

• Oregon
• Pennsylvania
• Utah

When is it optional?

Personal injury protection (PIP) is an optional coverage in some states and is not offered at all in others. In states where PIP is optional, it's generally a good coverage to have. That's because PIP can help cover expenses, such as your health insurance deductible, lost wages, and replacement services for tasks you cannot perform due to your injuries, such as childcare or house cleaning.

If you live in a state where PIP is optional, you might choose to decline it if you have a good health insurance plan that you'd use for car accident injuries. However, PIP has some perks that health insurance won't offer, such as reimbursement for lost wages and payments for services you can't do.

• Arkansas
• Connecticut
• Pennsylvania
• District of Columbia
• Texas
• Washington

How much does it cost?

The cost of personal injury protection (PIP) insurance depends on various factors, including the desired coverage level, age, type of vehicle, insurance company, and location. For instance, in Texas, insurance companies are mandated to offer a minimum of $2,500 in PIP coverage, which can be increased to $5,000 or $10,000 for enhanced financial protection. The cost of PIP insurance in Texas typically increases marginally when purchasing coverage above the $2,500 minimum.

In general, PIP insurance is relatively affordable, with monthly costs ranging from $5 to $50 for the coverage limits provided. However, the price can vary depending on the state, with no-fault coverage states generally having higher rates. Nevertheless, the cost of PIP insurance is often outweighed by the benefits it provides in the event of a serious accident.

In Michigan, for example, higher PIP limits contribute to more expensive car insurance premiums. On the other hand, states like Florida have a lower PIP coverage limit of $10,000, covering 80% of medical and disability expenses and offering up to $5,000 in death benefits.

When considering the cost of PIP insurance, it's important to weigh the potential benefits against the likelihood of needing this coverage. While it may not be mandatory in all states, PIP insurance provides valuable protection in the event of injuries, lost wages, and other expenses resulting from a car accident, regardless of fault.

What are the benefits?

Personal injury protection (PIP) insurance offers a range of benefits to policyholders and their passengers, even if they don't have health insurance. Here are some of the advantages of PIP:

• Medical Bills Coverage: PIP covers medical expenses resulting from a car accident, ensuring that you and your passengers receive the necessary healthcare without worrying about the financial burden. This includes ambulance services, hospital stays, surgeries, and other medical procedures.
• Lost Wages: If you are unable to work due to injuries sustained in the accident, PIP can provide payments for lost income. This benefit also extends to self-employed individuals who need to hire temporary workers to perform their usual tasks.
• Funeral and Burial Costs: In the unfortunate event of a fatality resulting from a car accident, PIP can help cover funeral, burial, or cremation expenses.
• Survivor Benefits: PIP can provide a small death benefit as a cash payout to the surviving dependents, helping to replace lost income and support them financially.
• Additional Services: PIP may also cover expenses for services you can no longer perform due to your injuries, such as childcare or house cleaning. This ensures that your daily life and that of your family is not disrupted during your recovery.
• No-Fault Coverage: One of the significant advantages of PIP is that it covers your expenses regardless of who is at fault in the accident. This means that even if you are responsible for the collision, your medical bills and other related costs will still be covered under your PIP policy.
• Prompt Payment: Since PIP claims are paid regardless of fault, there is no need to wait for a liability lawsuit to be resolved. This ensures that you receive timely payment for your accident-related injuries and expenses.
• Pedestrian and Cyclist Protection: PIP can also protect you if you are injured as a pedestrian or cyclist struck by a vehicle. This added layer of protection ensures that you are covered even when you are not driving or occupying a vehicle.

Frequently asked questions