No-fault insurance coverage may be available in your state. This post is about how it works and what you should know.
In a similar way to the collision and comprehensive automobile insurance that we have discussed, no-fault insurance is first-party insurance. No-fault insurance is sometimes called “Personal Injury Protection” or just PIP. Let’s call it PIP.
First-party means that the car insurance is specific to you and does not cover the person or entity with which you had the collision. It covers you (the insured) and passengers in your car, and, as state law may dictate, some other classes of people such as members of the household. But, unlike collision and comprehensive coverage that pay for physical damage to the car, PIP insurance pays only a portion of the medical bills and lost wages of people who are insured under the policy. PIP insurance does not cover physical damage to the car.
PIP insurance is not required in all jurisdictions, but it may be an available option that can be added to an automobile insurance policy.
What’s the Point of No-Fault Insurance or PIP?
The whole point of PIP coverage is to provide a source of payment for some of the medical bills and a portion of the lost wages of an individual injured in an automobile collision. Most states with a PIP system also include a limited death benefit for someone who is killed in an automobile collision. But, remember, the injured person has to be insured by the automobile insurance policy providing the PIP coverage, a passenger in the vehicle insured or a member of that person’s household. In some states, Florida for example, benefits are also payable to a pedestrian struck by the insured car.
One of the most important things about PIP is that generally, benefits are paid without regard to fault for the auto collision; that is why it is called no-fault insurance. In that respect, it was designed to reduce lawsuits between people involved in auto collisions; many times, those lawsuits were to recover medical bills and lost wages.
Since PIP was introduced, there has been much abuse of it (by people claiming to have been injured, by medical professionals and by lawyers) in many jurisdictions. One might say that the available benefits tend to get “milked.” To combat that, PIP laws have been amended over time by the exclusion of certain kinds of care and dollar limitations on reimbursement for other types, such as massage therapy. Sometimes, there are also requirements that medical care be sought within a stated period of time after the collision for PIP benefits to be payable. In virtually all states, the automobile insurance company must either pay the claim or deny it within a stated time.
There are situations where some states permit an automobile insurance policy to entirely exclude PIP benefits from the scope of PIP coverage. In Florida, those include when someone is hurt in an auto collision while committing a felony and when the injury is caused intentionally. Different states may allow auto insurers to exclude different circumstances.