Personal Injury Protection is an integral part of car insurance that most people like to know about before they purchase an auto insurance policy from any insurance company. But what exactly is PIP?
What is PIP Insurance?
Personal Injury Protection (PIP) is also known as “no fault insurance” and is an important component of an auto insurance that covers health expenses from being involved in a car accident. Even if any injured passengers do not have health insurance, PIP will cover the policyholder’s and the passengers’ medical expenses.
If the cost of medical expenses exceeds the policy coverage limit, health insurance might provide the remaining coverage. Since with PIP, the maximum coverage limit is set per person, it can cater to multiple people that have been involved in the accident.
Auto insurance coverage differs from state to state. However, in all no-fault states, PIP coverage is provided which covers all the medical expenses including the expenses of the policyholder and any one else that was in the car at the time of the accident, regardless of who causes the accident.
Maximum coverage limits are set by insurance companies. However, they are usually not more than $25,000. Whereas minimum coverage limits are set by the government.
How does PIP Insurance work?
If your state requires you to have Personal Injury Protection coverage then it might be essential for you to get it. However, it depends on your health insurance coverage and whether or not it covers all medical expenses. If it does, you can get away with purchasing the minimum amount of PIP. However, if your state leaves it up to you, you again need to take a look at your health insurance coverage, your financial situation and then decide accordingly how much you need to get. You can also speak to a personal injury lawyer who can help you decide what amount of coverage you need considering all the factors.
Medical coverage is sometimes deemed necessary and reasonable and includes all the expenses that are not already covered by your health insurance, if you have health insurance.
These medical expenses can include:
- Therapy and rehabilitation
- Surgery, X-rays, prescriptions, emergency care and nursing
- Dental care
- Psychological or physiological care
- Optometry services
- Non Medical care according to your religious beliefs
- Ambulance expenses
Most people mistake personal injury protection for liability insurance. I can assure you, it’s not the same thing. Liability insurance is usually required by every state and it pays for injuries caused to the other parties. However, PIP pays for your own injuries.
There’s also professional liability insurance which is usually taken out by business owners, financial advisers, or anyone who is at risk of being sued for damages or injuries.
What else does PIP cover?
Besides providing medical coverage in case of an accident, for not only the policyholder but also the passengers in the car, PIP has more to offer some of which includes:
- Work loss coverage.
If you have been involved in an accident and were badly injured due to which you are unable to work and your wages are being affected, PIP will cover any work loss you have suffered. This benefit would also apply for self employed people who need to employ temporary workers to help complete tasks.
However, not every PIP company may offer this benefit and if they do, it may end up costing you extra in your base car insurance.
Although every PIP coverage varies from company to company or state to state, the amount paid to replace loss wages is usually minimum.
An alternative when PIP is not being provided and you need to pay for expenses, a disability policy might be better for you as it will be long term as well as provide you with the money needed to take care of your expenses.
- Funeral expenses.
PIP can also help with funeral, burial, cremation costs after an accident. However, since funeral costs can be high and the PIP provision would be minimum, you might want to consider opting for a permanent life insurance policy to cover your funeral costs since it is possible that your PIP coverage might not reimburse the total funeral and burial costs.
- Survivors’ loss.
If you pass away in a car accident, PIP will replace your income for your dependents. It can also be called the death benefit. However, if you already have life insurance with a death benefit, the death benefit from PIP will not seem much in comparison. You might also not need it if you have life insurance with a death benefit since the PIP provision is not worth it and you would be better off with life insurance. However, for people who cannot afford life insurance, the PIP death benefit might be the only option for them.
- Essential services.
PIP can also help you pay for services that you would be paying for if you were not injured. For example, childcare, lawn mowing, doing laundry and house cleaning services.
However, your personal injury protection coverage does not include property damage, the other driver’s injuries, injuries sustained from comm itting a crime, injuries in an accident when you had received payment for driving.
Now that we know how PIP is paid and how to collect pip insurance, it is essential to know if you even need it. Because the personal injury protection coverage can overlap with other policies like health insurance and disability insurance, it may seem less important and if your state does not require you to have it, it might not be a necessary investment for you. Again, it depends on the type of risk you may be at or how your financial situation is looking.
However, if you have other policies like health insurance and disability insurance that covers everything PIP has to offer, it would be a good idea to keep your PIP coverage to a minimum, if any, so that you can have the benefit of low auto insurance premiums.