Personal injury protection (PIP): what it pays, no-fault states and your options

What does personal injury protection cover?

PIP is first-party coverage: it pays you and the people in your car, rather than people you injure. The Insurance Information Institute (Triple-I) describes the fullest versions as paying medical fees, lost wages, funeral costs and other out-of-pocket expenses. States set their own dollar limits for each piece, typically for:

Massachusetts shows how a smaller system works: its PIP covers medical expenses, up to 75% of lost wages and replacement services, all within a single $8,000 limit.

Who PIP covers

PIP is built to cover you and the passengers in your car. The Texas Department of Insurance, for example, says PIP pays for your and your passengers' medical bills plus costs such as lost wages. Exact rules on pedestrians, cyclists and relatives vary by state and policy, so check your policy's definition of an insured person.

What PIP does not cover

• Damage to your car, which is collision or comprehensive.
• Injuries you cause to people outside your car, which your liability coverage handles (or their own PIP, in a no-fault state).
• Pain and suffering. PIP pays economic losses. Claims for pain and suffering go through the at-fault driver, and in no-fault states only when the injury passes the state's threshold.
• Anything above your PIP limit, which may fall to your health insurance, medical payments coverage or a claim against the at-fault driver.

How no-fault states use PIP

In a no-fault state, the Triple-I explains, every driver files a claim with their own insurer after a crash, whoever was at fault. In exchange, the right to sue the other driver for pain and suffering is limited. You can still sue for severe injuries that meet the state's conditions, which take one of two forms:

• A verbal (descriptive) threshold lets you sue only if the injury meets a definition of serious injury written into state law, such as death or significant disfigurement.
• A monetary threshold lets you sue once your medical expenses pass a set dollar amount.

Liability coverage still matters in these states. It pays for property damage you cause, and it responds when someone you injure passes the threshold and sues you.

Choice no-fault states

In 3 states, New Jersey, Pennsylvania and Kentucky, drivers choose between the no-fault option, with its limit on lawsuits, and keeping the full right to sue. The Triple-I notes that New Jersey's and Pennsylvania's no-fault options use a verbal threshold and Kentucky's uses a monetary threshold.

New Jersey's buyer's guide shows how the choice looks on a real policy:

• Limited Right to Sue. You give up the right to sue for pain and suffering unless you suffer one of the listed permanent injuries, such as loss of a body part, a displaced fracture or death. You can still sue for economic losses.
• Unlimited Right to Sue. You keep the right to sue for pain and suffering for any injury.

New Jersey also lets you choose your PIP amount, from $15,000 upward, with up to $250,000 available for certain serious injuries, and offers a "health care primary" option that makes your health insurance pay first. The state notes that Medicare and Medicaid cannot be used for that option, so check what your health plan covers before choosing it.

Add-on systems and other states with PIP

The Triple-I describes a third model, the add-on system. Drivers collect first-party benefits from their own insurer, much as in no-fault states, but there is no limit on lawsuits. Those benefits were added on top of the traditional fault-based system rather than replacing it, and they are typically smaller than in true no-fault states.

Some states outside the no-fault list put PIP on policies in their own way:

• Texas. The Texas Department of Insurance says all Texas auto policies include PIP, and you must tell the insurer in writing if you do not want it.
• Maryland. The Maryland Insurance Administration says state law requires minimum PIP of $2,500, but some policyholders with health insurance can waive it to lower their premium.

Because neither is a no-fault state, PIP there sits alongside your right to claim against the driver who caused the crash.

Michigan's PIP choices

Michigan, a verbal-threshold no-fault state, lets drivers choose their PIP medical limit. The state's auto insurance site lists these levels:

1. Unlimited coverage, which applies if you do not choose.
2. Up to $500,000.
3. Up to $250,000.
4. Up to $250,000 with PIP medical exclusions, for named insureds whose non-Medicare health coverage covers auto injuries.
5. Up to $50,000, for named insureds enrolled in Medicaid.
6. Opting out of PIP medical, for named insureds with Medicare Parts A and B.

Lower limits mean a lower premium but more risk that a serious injury exhausts the coverage. Before choosing, confirm what your health plan pays after a car crash and whether everyone in the household is covered by it.

PIP amounts in states we verified

For Hawaii, Kansas, Kentucky, North Dakota, Pennsylvania and Utah, check the amounts with the state insurance department or the state minimums tool.

Choosing a PIP limit when you have a choice

1. Find your state's minimum and whether you can choose a higher amount, reject PIP or coordinate it with health insurance.
2. Read your health plan's rules for auto accident injuries, including deductibles, networks and whether it pays first or second.
3. Think about lost income. Health insurance does not replace wages, but PIP often does.
4. Consider who rides with you. PIP usually covers passengers who may have no health coverage of their own.
5. Ask an agent to quote two or three PIP levels so you can see the price difference.
6. Look at medical payments coverage as a supplement if your state offers it.