What Is Personal Injury Protection Insurance?

What Is a Personal Injury Protection Policy?

Personal injury protection, or PIP, is first-party coverage—that is, coverage that applies to the party who holds it. If you have PIP, you can file a claim after a car accident to get reimbursed for costs from your insurer, regardless of who's at fault in the accident.

PIP covers medical payments up to your policy's medical bill limit if you are injured in a car accident. It may also cover lost wages, funeral costs and other costs related to the accident.

PIP differs from bodily injury liability insurance, though both cover injuries resulting from an accident. PIP protects the people in your vehicle, while bodily injury insurance pays for injuries to occupants in the other vehicle should you cause an accident. PIP also differs from medical payments coverage, which is another version of first-party insurance that only covers medical bills and not things like lost wages after an accident.

Furthermore, PIP does not cover damage to property such as your or another party's vehicle. Policyholders carrying PIP generally need to carry property damage liability insurance on their vehicles to cover damages to property.

In no-fault states, personal injury protection coverage is used for lower-cost damages following a car accident. This practice was devised to prevent policyholders from filing lawsuits for low sums, which cost insurance companies and may lead them to increase rates across the board. PIP provides a payout from the insured's own insurer faster than they would likely get money through a liability investigation or lawsuit.

Some PIP policies prevent policyholders from filing lawsuits for damages unless they exceed established thresholds. When damages exceed a threshold—either a descriptive verbal threshold or a monetary amount—policyholders may sue an at-fault driver.

Do You Need Personal Injury Protection Coverage?

For residents of no-fault states, personal injury protection is required. Those states include:

• Florida
• Hawaii
• Kansas
• Kentucky
• Massachusetts
• Michigan
• Minnesota
• New Jersey
• New York
• North Dakota
• Pennsylvania
• Puerto Rico
• Utah

There is some variation in PIP coverage requirements even in no-fault states. For instance, Kentucky motorists may submit a rejection of PIP coverage and reserve their right to sue at any threshold.

In other states, drivers may have the option to add PIP coverage. This occurs in "choice" no-fault states, where drivers have the option to choose between first-party coverage plans or plans that allow for lawsuits at any threshold. It may also be available in "add-on" states, where drivers may include first-party coverage as an extra.

Add-on states include:

• Arkansas
• Delaware
• Maryland
• New Hampshire
• Oregon
• South Dakota
• Texas
• Virginia
• Washington
• Washington, D.C.
• Wisconsin

Deciding whether to add PIP coverage to your policy if you're not already required to have it can be part of finding the most affordable insurance. When factoring in the fact that your own health insurance will not cover people outside your family such as carpool companions or come with coverage limits, PIP could be worth adding. Liability insurance may take a long time to settle, so paying for PIP could save you money or time in the long run.

How Much PIP Should I Get?

If you're in a no-fault state, your state likely mandates minimum PIP coverage. Insurance companies typically offer policies with a range of PIP coverage amounts, which may be written as an amount of coverage per person up to a maximum payout per accident, such as $15,000/$30,000.

Carrying more than minimum PIP coverage may be advantageous because it can be more versatile and less expensive than your health insurance. Factor in your health insurance's deductible amounts and coverage limits to help you decide. According to the CDC, the average cost of care after a car accident is $12,270 for a vehicle occupant. Getting coverage for at least that amount is a smart move, but because PIP will also cover other losses, such as lost wages, you may want to extend coverage higher.

Calculating how much car insurance you need and how much you can afford to pay is highly individualized, but higher PIP insurance may be worth it if it works in your budget. Just be aware that PIP may not be enough to cover all your medical expenses depending on the injury, how the hospital bills and other factors.

The Bottom Line

If you live in a no-fault state, there are laws on the books that say you must carry personal injury protection. This will make sure your medical bills are paid for up to a certain amount without having to rely on a liability investigation or court case. How much you carry may be up to your discretion, so make sure to calculate enough to cover potential injuries and things like lost wages. Even if you don't live in a no-fault state, you may want to consider PIP coverage if your insurer offers it.

If you're worried you're spending too much on car insurance, look for ways to cut your costs. You can get free quotes from several leading providers at Experian.com.