You may have heard the term “PIP” before in connection with your car insurance. You may also have heard the term “med pay.” This article will walk through the basics of each and some of their differences.
Each state in the union has a different set of laws dealing with car insurance. These laws address things like minimum coverages, “un” and “underinsured” coverage, property damage and of course, medical bills. In some states, like Kentucky or Michigan, the legislature has adopted a “no-fault” system of car insurance that uses PIP to pay for some medical bills. PIP is an acronym that stands for personal injury protection. PIP coverage is usually mandatory and not optional. In a PIP state, if you are involved in a wreck, YOUR car insurance will offer a certain amount of money – $10,000 for example – for you to use to cover medical bills, lost wages, replacement services, funeral bills and medical insurance subrogation. This coverage is available for each person legally in the car and it does not matter who, if anyone, is at fault. If you are not the driver at fault, then your insurance company will generally be paid back the PIP amounts from the at fault driver’s insurance company. The PIP money is just a quick way to get medical bills paid so that you can get the treatment you need immediately.
Other states, like Tennessee for example, use a different system called “med pay” to cover medical bills. It’s like PIP in that med pay offers a certain amount of money – $5,000 – for example, to cover medical bills related to a car wreck. However, unlike PIP, med pay coverage is usually optional and only applies, like the name implies, to medical payments. Further when med pay is used it generally reduces the amount of liability coverage available. For example, assume you were rear-ended by someone with a $25,000 liability policy. You go to the doctor and incur $4,000 in medical bills. Your insurance will pay the $4,000 out of your med pay if you bought the coverage, but the at fault person’s insurance company would repay the $4,000 directly to your insurance company only leaving you $21,000 to cover your economic losses and pain and suffering.
So – what’s the difference? Really, it depends on the contract language. Too often people forget that insurance coverage is just a contract between you and the insurance company. What you are paying for and what you get is laid out in simple terms in the policy. It is critically important that you take some time and review those coverages, and more importantly the exclusions, with your agent. Both PIP and med pay can be used regardless of fault to cover medical bills. Generally, PIP applies broader and covers other losses. Further, PIP does not reduce the amount of liability coverage available. However, for those reasons, PIP is more expensive to purchase. In today’s world where the law is that you have health insurance already, the necessity for either PIP or med pay may be diminishing. In the end, you should review your coverages carefully and make the best decision for you and your family.