Med-Pay vs. PIP for Auto Insurance

Personal Injury Protection (PIP) and Medical Payments (Med-Pay) are auto coverages that pay regardless of who is at fault in an accident.  While these coverages have some things in common, they are different.  According to the Office of Public Insurance Counsel, here are some of the key differences:

Personal Injury Protection (PIP)

• Companies must provide $2,500 per person in coverage, unless it is rejected in writing.
• PIP covers the policyholder, family members living in the household, any driver with permission to drive the covered vehicle, and passengers. Insurers will pay reasonable accident related medical and funeral expenses within 3 years of the accident.
• PIP also pays 80% of lost wages. If the injured person is unemployed, PIP pays for essential services, such as child and lawn care, that the person does for the family household.

Medical Payments (Med-Pay)

• Companies are not required to offer this coverage.
• Unlike PIP, Med-Pay does not pay lost wages, or pay for essential services if the injured person is unemployed.
• Med-Pay also covers reasonable accident related medical and funeral expenses. However, who and what is covered may be very different, so check your policy. Some examples of the differences may be: only pays for the expenses within one year of the accident; and only reimburses your health insurance deductibles and co-pays.

One of the biggest misunderstandings regarding these two insurance coverages is that one (Med-Pay) may have to be paid back if there is a settlement with a third-party, and the other (PIP) does not.

For example, Jane Doe is rear-ended by John Doe.  Jane Doe has $2,000 in medical payments that she eventually claims.  She also received $5,000 from John Doe’s insurance policy as part of her third-party settlement.  In this case, the $2,000 Med-Pay payment to Jane Doe’s by her insurance company is subject to subrogation (which means that her insurance company has the right to be reimbursed from Jane Doe’s third-party settlement with John Doe).  If Jane Doe had PIP (instead of Med-Pay), her insurance company would NOT have the right to be reimbursed from Jane Doe’s third-party settlement with John Doe’s insurance company because PIP payments do not provide an insurance company with the right of subrogation.

Are you curious to know whether your insurance company will have the right to be paid back for certain coverages that you have under your policy?  If so, read over your policy and see if you have Med-Pay, PIP, or neither.