Beyond feeling the pain and discomfort of injury, an auto accident could cause you to incur hefty bills and put you down for long periods resulting in loss of income. Insurance coverage can provide a financial safety net against such adverse effects.
When a car accident occurs, it is important to know the extent of the financial damage. This is where a liability adjuster would be helpful. They will be able to determine if the insurance coverage is sufficient to meet all costs or if the client has to pay for some expenses out-of-pocket.
Like many motorists, you could assume you are covered if you have liability coverage. But that is not so. It is why you need a PIP. Personal injury protection (PIP) would also help secure your financial well-being. But unlike liability coverage, it is not mandatory across the states.
If you are wondering, how does PIP work? Or why have a PIP if you already have liability coverage? This article will help you better understand PIP and liability coverage. We also compare the two and give tips to help you decide when to add Personal Injury Protection to your auto insurance options.
What is Personal Injury Protection and Liability Coverage?
Liability coverage is a type of auto insurance that pays for damage to property or medical expenses of other parties involved in an auto accident. It does not cover the policyholder’s medical expenses or damaged property. There are two types of liability coverage:
- Bodily injury liability coverage extends to bodily harm that you (the policyholder) or any other person listed on the policy causes to another person in an auto accident. It may cover costs like medical bills, lost income, or legal fees if the injured party sues you.
- Property damage liability coverage extends to damage that you (the policyholder) or any other person listed on the policy causes to another person’s property in an auto accident. It may cover costs like repairing or replacing motor vehicles, fences, and utility poles.
Liability coverage is mandatory across all states. The cost varies depending on factors like the insurance company, state law, driving record, type of car, and age and gender of the policyholder.
Personal Injury Protection on the other hand, is insurance that covers the medical bills and rehabilitative costs for drivers and passengers involved in a car accident. Unlike liability coverage, PIP also covers losses incurred by the policyholder. The insurer pays no matter who is at fault. Thus, it is also known as no-fault coverage.
Differentiating the Two
The main difference between the two is who benefits from the coverage. Liability coverage compensates for injury and damage you cause to other people and their property. It does not pay for injury or damage to yourself or your property. Liability coverage is also mandatory across all states.
PIP, on the other hand, includes the policyholder and their property as benefactors and is voluntary in most states. Thus, you don’t have to pay premiums or show proof if you live where it is optional. PIP coverage extends to other parties involved in the accident. It covers passengers in other cars, pedestrians, and cyclists.
When do you need liability coverage, and when do you need PIP
If you are a motorist, you must sign up for liability coverage. You must pay premiums and obtain proof of liability coverage no matter where you live. It is against the law to drive without suitable liability coverage. Drivers without liability coverage could be arrested and charged.
The penalty for driving without liability coverage may be:
- Suspension of your driver’s license
- Loss of your vehicle registration
- Spending time in jail.
On the other hand, PIP is optional in 49 states. Thus, you can sign up for coverage at your discretion. Nevertheless, it is not just a matter of whether you fancy it or not – PIP is critical, especially for motorists who have dependents.
It can help mitigate several financial risks resulting from an auto accident including the following:
- Extended hospitalization
- Ongoing professional care
- Home upkeep expenses like child care and cleaning if you cannot undertake these.
- Funeral expenses due to accidental death
- Lost wages in case you are not able to work
Personal Injury Protection might also extend to the passengers in their car (could be your family). It could even cover you if you are hit by a car while walking or cycling.
PIP is a broader financial safety net that extends beyond the minimum losses due to an auto accident. It could help you prevent loss of assets due to lawsuits filed against you after a crash you caused. But you need an experienced lawyer to help secure suitable compensation. If you have difficulty factoring PIP into your budget, look for auto insurance companies that offer affordable personal injury protection.
Which is the Right Coverage?
If you are a motorist, you have no option but to sign up for liability insurance.
As for PIP, it is optional. Consider the following factors when signing up for coverage:
- Is it mandatory by law in your state? According to the Insurance Information Institute, the following 12 states require PIP coverage by law: Delaware, Florida, New Jersey, New York, Hawaii, Utah, Massachusetts, Michigan, Oregon, Minnesota, North Dakota, Michigan, and Kansas.
- Can you afford it? When checking affordability, consider what you could afford to pay out of pocket in medical bills and repair and replacement costs.
- How much insurance coverage do you need?
- What is your social status? A PIP makes more sense for motorists who have dependents than those who don’t.
- What is the state of your driving record? PIP rates will not increase if you make a claim. The insurer pays the compensation regardless of who is at fault. Thus, motorists with tainted driving records could consider it.
- The insurer. Think about the auto insurance company and choose a company that best serves your needs.
- Whether you qualify for a discount. You may qualify for a discount on PIP rates. Perhaps it is your credit score, age, or impeccable driving record. A discount could significantly reduce the cost of PIP and increase coverage.
Whereas liability coverage is a mandatory insurance cover for all motorists in the US, personal injury protection is not. PIP is optional in some states. But it is crucial and could help you mitigate various financial risks. All motorists, regardless of where they live, should consider including PIP in their insurance options.
