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PIP Insurance Basics

October 08, 2014

The basics of personal injury protection (PIP) insurance

Not only are auto accidents unpredictable, but so are the chain of events that can spiral forth afterward. That’s why personal injury protection, or PIP insurance, exists.

While auto insurance coverages such as liability and collision insurance are important, they won’t be able to help you in the event that you miss your work paycheck or incur other miscellaneous expenses because of a car accident. This article will help teach you what PIP covers and whether you need this coverage or not.

How PIP works

While other types of auto insurance may or may not kick in depending on which drivers are at fault, PIP is different. Personal injury protection insurance is considered no-fault coverage because it covers impacted policyholders, drivers and passengers regardless of whether another driver or they were deemed to be at fault for an accident.

If you are unable to work because of injuries caused by a car accident, in some cases, you’re entitled to cover up to 80 percent of lost wages through PIP. Other potential covered expenses include:

  • Medical bills and hospital expenses
  • Rehab costs
  • Childcare
  • Funeral expenses
  • Household cleaning services

Depending on the severity of injuries and length of recovery, PIP may represent a significant financial stake. It’s important to make a distinction between PIP and medical payments coverage, commonly known as med pay. While PIP covers more expenses, it also carries a deductible, where med pay does not. Drivers choose one of these coverages, not both.

Mandatory PIP states

There are a dozen states where PIP coverage or med-pay is mandatory, including:

  • Arkansas
  • Delaware
  • Florida
  • Hawaii
  • Kansas
  • Kentucky
  • Maryland
  • Massachusetts
  • Michigan
  • Minnesota
  • New Jersey
  • New York
  • North Dakota
  • Oregon
  • Pennsylvania
  • Utah
  • Washington
  • Texas

As PIP is a no-fault product, these are all no-fault states. You’ll want to check and see what the minimum coverage level is for your state. In Maryland, Washington and Texas, policy holders can avoid mandatory PIP coverage by signing a waiver.

PIP insurance is like many auto insurance products; you don’t fully appreciate it until you need it. And hopefully you never need it. But if you’re involved in an accident that causes more severe injuries, PIP can help you and others focus on recovery and not stress about finances.

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