What Is Personal Injury Protection (PIP) Insurance?

Insurance coverage exists in many forms, and personal injury protection (PIP) insurance offers relief in the event of an accident where fault is impossible to determine, or in the event of a car accident in a state with a no-fault accident law. Drivers have many options when it comes to purchasing auto insurance, and the requirements for no-fault states are different than fault-based state rules. PIP insurance covers damages to the policyholder regardless of fault, whereas liability coverage only applies to other drivers’ damages in the event a policyholder causes an accident and harms another driver.

How Does Personal Injury Protection Insurance Work?

In a typical auto liability insurance policy, the policy stipulates that the at-fault party is responsible for any damages in a covered event. This means if a negligent driver causes an accident, his or her insurance policy covers the resulting damages up to the coverage limits of the policy. The policyholder would be personally responsible for any remainder. PIP insurance functions as no-fault insurance that can cover most medical expenses and some other damages after a car accident in a no-fault state.

PIP insurance may offer as much as 80% coverage of medical expenses resulting from a covered accident depending on the coverage limits of the policy. PIP insurance may extend to coverage for injuries to a covered driver and his or her passenger or to a policyholder while riding as a passenger in someone else’s vehicle. This type of coverage may also pay funeral expenses in the event of a covered death or rehabilitation and other ongoing medical coverage. PIP insurance may even cover lost wages resulting from a covered event. More extensive coverage will inevitably be more expensive to maintain, and drivers must weigh the cost of coverage against their individual insurance needs and state requirements.

What Is a No-Fault State?

States that follow no-fault car accident laws and states that require PIP coverage with all drivers’ auto insurance policies stipulate minimum coverage requirements. A driver must purchase an auto insurance policy that meets these requirements in his or her state, but there is almost always an option to purchase additional coverage or extended coverage limits. However, this comes at a cost in the form of higher premiums.

Every state defines what types of damages qualify for coverage under PIP insurance. For example, a policyholder may have the option of claiming PIP coverage for certain alternative medical treatments in some states but not in others. Utah state law allows PIP insurance holders to request coverage for acupuncture treatments while California does not.

Determining Your Ideal Coverage Level

Since PIP insurance generally offers more extensive coverage than typical auto liability insurance, PIP policies are generally more expensive to maintain. However, PIP is a requirement in 13 states and available as optional coverage in several more. If your state requires carrying PIP insurance, you at least have the comfort of knowing most accidents avoid questions of fault and your coverage will take effect. In a state that allows PIP coverage but does not require it, it may be worth the effort for some drivers to investigate what PIP coverage would offer.

When purchasing any insurance policy, it is essential to fully understand the terms of coverage, what events are covered, the extent of coverage available for certain damages, and any disclaimers or exceptions that could apply under the policy. Meeting your state’s minimum insurance requirements may be the most affordable option, but doing so could leave you in a vulnerable position after an accident. Your coverage may not fully compensate all the associated damages from an accident, or your minimum coverage may not fully cover an injured driver’s damages if you cause an accident.