PIP stands for Personal Injury Protection. It is a form of mandatory no-fault auto insurance that is available in the 13 no-fault auto insurance states. Since California is a “fault” auto insurance state, technically, there is no such thing as PIP insurance in California.
California does, however, offer the functional equivalent, known as Personal Injury Insurance or MedPay, on a voluntary purchase basis. Purchasing MedPay does not relieve you of the obligation to purchase liability insurance, which is mandatory in California.
California law requires any insurance company that offers auto insurance to offer MedPay as an option.
Maximum coverage amounts vary -– $1,000, $2,000, $5,000, $10,000, and $25,000 coverage plans are typical. State Farm offers policies worth up to $100,000.
How MedPay Works
In a traffic accident, MedPay covers you and your passengers for:
- Medical expenses;
- Lost earnings;
- Other out-of-pocket expenses, such as child care and house cleaning; and
- Funeral expenses if someone dies in the accident.
Always keep in mind the financial limitations of the policy; MedPay will not exceed these limits no matter how serious your injuries are.
What Are “Medical Expenses”?
Medical expenses can include bills for the following services:
- Ambulance bills;
- Emergency room bills;
- Doctor bills;
- Hospital bills;
- X-rays and medical testing expenses;
- Short- or long-term care (the expenses of a home healthcare aide, for example)
- Physical therapy; and
MedPay may or may not balk at covering certain types of medical expenses, such as acupuncture and chiropractor expenses.
Uninsured/Underinsured Motorist Coverage
MedPay offers coverage for the following types of accidents:
- Hit-and-run accidents;
- Accidents where you can identify the driver, but the driver does not carry insurance; and
- Accidents where the at-fault driver doesn’t carry enough liability insurance to pay the full amount of your claim (in California, you can drive legally only while carrying $15,000 in liability insurance per person).
Although you can purchase non-MedPay uninsured and underinsured motorist insurance, it is more difficult to use than PIP insurance.
Advantages of MedPay Insurance
MedPay offers several major advantages that more than justify the extra expense for most Californians.
- There are no deductibles or copays.
- MedPay won’t try to choose your doctor for you.
- MedPay covers your passengers, too, even if they didn’t purchase MedPay.
- MedPay covers you and your immediate family as passengers in another vehicle, pedestrians, and passengers on public transportation.
- There is no annual cap on coverage (although there is a “per incident” cap).
- You can use MedPay even if you were at fault for the accident.
- You can use MedPay even if you have an accident in another state.
- You are likely to receive your money much faster than you would have if you had filed a third-party personal injury claim against an at-fault driver’s liability insurance policy.
These advantages make MedPay well worth the extra money for most California drivers.
Disadvantages of MedPay Insurance
Despite its advantages, MedPay suffers from several important disadvantages.
- MedPay costs money, thereby adding to your total insurance bill.
- MedPay insurance does not pay for pain and suffering or other non-economic damages. Non-economic damages frequently amount to well over half of the total value of a personal injury claim.
- MedPay does not pay for the other driver’s injuries. California law requires you to purchase liability insurance for this purpose. Nevertheless, your policy limits may not cover a large claim, and MedPay does not add to your liability insurance policy limits.
- MedPay does not cover property damage, such as damage to your car.
Treat MedPay as an addition to your existing insurance portfolio, not as a stand-alone product that you rely on for all of your insurance coverage needs.
You are only entitled to one recovery. In other words, once you receive full compensation for your losses, you are not entitled to any more money. Subrogation occurs when you receive compensation from MedPay, and you receive additional compensation from, say, an at-fault driver’s auto insurance liability policy. MedPay will then have the right to demand that you reimburse them for any excess payment.
Suppose, for example, that MedPay and the liability insurance company each pay you $5,000 for medical expenses, for a total of $10,000. Suppose further that your total medical expenses were only $8,000, resulting in an overpayment of $2,000. MedPay can seek reimbursement of the extra $2,000, even if you have to pay it out of your own pocket.
When It Makes Sense to Rely on MedPay
Relying on MedPay makes the most sense when:
- When the accident was your fault,
- When your injuries are minor, and you don’t want to go to the trouble of filing a third-party claim with the at-fault party’s liability insurance company;
- You drive in other states; or
- You have no health insurance, or it has high deductibles or copays.
If the accident was your fault, MedPay might be your only option to cover your own injuries. In the latter three cases, relying on MedPay could simplify matters and save time or money.
When You Need a Lawyer
You should consult with an attorney if the value of your claim is significant or if you are not sure of its value. Most car accident attorneys work on a contingency fee basis, meaning that you only pay if you win your claim.