Alternate name: No-fault coverageAcronym: PIP
How Does PIP Insurance Work?
Legislation introduced the no-fault system in the 1970s to make it faster and easier for accident victims to receive compensation, regardless of who was at fault for the accident. Under this system, financial losses like medical expenses are paid for by each party’s own insurance carrier, rather than having to wait for the insurers to agree who was at fault—and legally liable—for accident costs. States where PIP is required or optional have laws that allow policyholders to seek compensation from their own insurance company after an accident. In some of these states, known as no-fault states, you can only sue the other driver for additional medical expenses or pain and suffering if your injuries meet a state-specific tort threshold. Thresholds can either have verbal terms, like death or significant disfigurement, or monetary terms, such as minimum dollar amounts for medical bills. For example, say you’re a Utah policyholder and you’re in a car accident. You have a PIP limit of $3,000, and your state has a tort threshold of $3,000. Your medical expenses from the accident total $2,500, so your insurer will cover your entire medical bill because it’s less than your PIP limit (as long as you’re eligible—see next section). But because your medical bill is below the tort threshold, you cannot sue the driver who hit you for pain and suffering. States with “add-on” car insurance laws have no restrictions on lawsuits, unlike no-fault-based systems. But drivers get compensation from their own insurers as they would in no-fault states. In some of these states, PIP is still required, while in others, coverage is optional.
What Does PIP Insurance Cover?
Depending on your state, PIP may cover these items when you’re involved in an accident—even if you weren’t driving:
Medical bills for everyone on the policy (including when hit as a pedestrian, cyclist, or a passenger in another car). Lost wages for you and your passengers if injuries cause you to miss work. Cost of hiring temporary workers to handle your workload if you’re self-employed . Essential services like lawn and child care and house cleaning. Death benefits paid to your family in the event of your death. Funeral, burial, or cremation expenses after a crash. Disability and rehabilitation expenses.
Children living at home or away at school are automatically covered by a parent’s car insurance policy. Generally, your policy should list anyone over the age of 14 who lives in your house, even if they don’t have a license, though insurers may have different minimum age requirements. Anyone who drives your car regularly should also be on your policy. It’s not unusual for insurers to request this information when you obtain quotes or purchase a policy.
Exclusions
Your insurer may not pay out PIP benefits if the driver:
Intentionally caused the accident.Was hurt while committing a felony.Was injured while driving your insured car without your consent.Was driving a vehicle they own but that was not listed on the insurance policy.
Additionally, passengers or relatives who live with you and own their own cars may not be covered by your PIP coverage. They may have to purchase PIP for themselves.
Do I Need PIP Insurance?
Some states require PIP insurance as part of your car insurance policy, so if you live in one of them (see table), yes, you need PIP coverage. Three of those states (Kentucky, New Jersey, and Pennsylvania) are “choice no-fault” states, where you can reject the no-fault system and go with a traditional tort liability (fault-based) system if you prefer. Here’s where PIP insurance is required and optional, as well as other important details. When available, medical payments coverage is nearly always optional. PIP, however, can be obligatory or optional, depending on your state’s laws. Both coverages help pay medical expenses for you and your passengers after a car accident, regardless of who caused it, but PIP has additional coverages. For instance, it can cover up to 80% of lost wages and household services like child and lawn care if you can’t fulfill those responsibilities because of injuries.
