Medical Payments (MedPay) and Personal Injury Protection (PIP) coverage are important aspects to your car insurance policy, as they are designed to help pay the medical expenses of both you and your passengers after an auto accident.
MedPay and PIP coverage differ distinctly from the other coverages on your car insurance policy. Liability coverage pays for OTHER people’s injuries or property damage, while comprehensive and collision coverage pay for damages to your own vehicle.
In this Car Insurance 101 article, we will explain how these two important coverages benefit you and detail how PIP differs slightly from MedPay. You will also lean about coverage limitations, different rules depending on where you live, and how to avoid overpaying for coverage that is already provided by your health insurance.
What is Medical Payments (MedPay) coverage?
Medical Payments coverage, commonly referred to as MedPay, is an integral component of auto insurance designed to cover medical expenses incurred due to a car accident, regardless of who is at fault.
MedPay is specifically aimed at ensuring prompt payment for the medical treatment of injuries sustained by you, the policyholder, as well as your passengers.
MedPay coverage can pay for medical expenses such as:
- Hospital and ambulance fees
- Doctor consultations
- Surgery and X-rays
- Professional nursing services
- Prosthetic limbs
- Dental procedures due to accident injuries
- Funeral expenses
- Rehabilitation costs
- Medications and medical supplies
- Orthopedic appliances and equipment
An important aspect of MedPay is its flexibility. It can serve as a complement to your health insurance or as a standalone coverage for accident-related medical expenses.
If your health insurance has a high deductible or co-pays, MedPay can help fill these gaps and provide financial resources to pay for these expenses that would normally be paid out-of-pocket.
In addition, MedPay covers you when you’re driving your own vehicle, a passenger in another vehicle, or even if you’re hit by a car while walking or riding your bike.
What is Personal Injury Protection (PIP) coverage?
Personal Injury Protection (PIP) coverage, sometimes referred to as “no-fault” coverage, provides similar coverage as MedPay, but it actually goes a step farther and also provides coverage for lost wages and rehabilitation expenses.
PIP coverage is particularly noteworthy for its role in no-fault states, where drivers can file a claim under their own PIP coverage without the need to prove the other party’s fault to receive payment.
This feature significantly speeds up the process of receiving financial assistance for accident-related expenses, allowing policyholders and their passengers to focus on recovery without the added stress of financial burdens.
The scope of PIP coverage can vary significantly from one state to another, with some states mandating its inclusion in auto insurance policies and others offering it as an optional coverage.
These U.S. states require PIP to be included on a car insurance policy:
- Delaware
- Florida
- Hawaii
- Kansas
- Kentucky
- Massachusetts
- Michigan
- Minnesota
- New Jersey
- New York
- North Dakota
- Oregon
- Pennsylvania
- Utah
The District of Columbia gives drivers the choice between no-fault or tort-based systems. If drivers choose the no-fault option, then PIP is required as a coverage on their car insurance policy.
There are a handful of states that do not mandate PIP as part of a car insurance policy, but do allow drivers to buy the additional protection provided by PIP coverage.
States that do not require PIP but allow it as an optional coverage:
- Maryland
- New Hampshire
- South Dakota
- Texas
- Virginia
- Washington
- Wisconsin
It’s important to note that this information is current as of the writing of this article, but insurance regulations can change at any time. Check with your state’s insurance department or your agent for the latest requirements where you live.
Figure 1 below shows which U.S. states have both mandatory and optional PIP coverage. Orange states have mandatory PIP while blue states have the option to purchase PIP but do not require it. Grey states offer medical payments coverage only and do not have a PIP option.
Key differences between MedPay and PIP coverage
As mentioned earlier, PIP provides extra protection for expenses like lost wages and rehab expenses. MedPay coverage does not provide protection beyond medical expenses resulting from an auto accident.
Additional expenses covered by PIP that are not covered by MedPay:
- Lost wages due to time off work for recovery
- Rehabilitation costs beyond immediate medical care
- Funeral expenses
- Replacement services for tasks the injured person cannot perform (e.g., house cleaning, child care)
- Survivor’s loss benefits, providing financial support to dependents
- Costs associated with necessary household services the injured person can no longer perform
By offering a comprehensive coverage package, PIP ensures that individuals involved in auto accidents receive the necessary support to cover immediate and ongoing expenses.
As we mentioned in the previous section and illustrated in Figure 1, there are some states that allow PIP coverage to be included on your policy even though it is not required. This gives drivers the option to have the added protection provided by PIP, for an additional premium.
Scenario illustrating the difference between MedPay and PIP coverage
Let’s consider a scenario where Sarah finds herself involved in a car accident on her way home from work. Another driver fails to stop in time, resulting in a collision with the rear-end of Sarah’s car. Sarah experiences immediate back pain and discomfort, prompting an emergency room visit.
If Sarah has MedPay coverage on her car insurance policy:
For this example, let’s set Sarah’s Medical Payments (MedPay) coverage limit at $10,000.
Medical Expenses Incurred:
- Emergency room visit: $1,500
- Diagnostic X-rays: $300
- Follow-up visits to a specialist (chiropractor), including 5 sessions: $1,000 ($200 per session)
- Prescription pain medication: $200
- Total Medical Expenses: $3,000
Here’s how Sarah’s MedPay coverage will pay
Sarah’s MedPay coverage is designed to address medical expenses resulting from an auto accident, irrespective of who’s at fault. After the accident, Sarah files a claim with her insurance company, submitting the necessary medical bills as evidence of her treatment costs.
Given that her total medical expenses amount to $3,000, well within her MedPay coverage limit of $10,000, Sarah’s insurance company approves her claim and reimburses her for the full amount of her medical expenses.
This reimbursement covers the emergency room visit, the cost of diagnostic tests, the specialist’s fees for follow-up visits, and her prescription medication, ensuring that Sarah is not out of pocket for these expenses.
Here’s how Sarah’s MedPay coverage benefitted her in this scenario
- Immediate Financial Relief – Sarah receives prompt reimbursement for her medical expenses, alleviating the financial stress often associated with post-accident medical care.
- No Fault Necessary – Because MedPay operates independently of fault, Sarah benefits from her coverage without the need to determine who was at fault in the accident.
- Simplicity and Convenience – The straightforward nature of MedPay allows Sarah to focus on her recovery, without navigating complex insurance claims processes or negotiations.
In this scenario, MedPay serves as a crucial safety net for Sarah, providing financial protection against the unexpected medical expenses that arose from her auto accident.
Had Sarah not had an adequate MedPay limit on her policy, she could have had substantial out-of-pocket medical costs.
If Sarah has PIP coverage on her car insurance policy
Let’s revisit Sarah’s scenario, but this time, she has Personal Injury Protection (PIP) coverage instead of MedPay.
After the rear-end collision, Sarah not only faces medical expenses but also deals with lost wages due to taking time off work for recovery. For this example, let’s set Sarah’s PIP coverage limit at $15,000.
Medical Expenses and Other Expenses Incurred:
- Emergency room visit: $1,500
- Diagnostic X-rays: $300
- Follow-up visits to a specialist (chiropractor), including 5 sessions: $1,000 ($200 per session)
- Prescription pain medication: $200
- Lost wages for two weeks (Sarah earns $1,000 per week): $2,000
- Replacement services (cleaning and childcare, since Sarah is a single mother and needs help during her recovery): $500
- Total Expenses: $5,500
Here’s how Sarah’s PIP coverage will pay
After the accident, Sarah files a claim under her PIP coverage, submitting her medical bills, proof of lost wages, and receipts for replacement services.
PIP coverage, unlike MedPay, not only covers Sarah’s medical expenses but also compensates her for lost wages due to her inability to work post-accident and pays for necessary replacement services during her recovery.
Given that her total combined expenses amount to $5,500, and her PIP coverage limit is $15,000, Sarah’s insurance company approves her claim and reimburses her for the entire amount.
This includes all her medical expenses, two weeks of lost wages, and the cost of hiring help for household tasks she’s temporarily unable to perform.
Here’s how Sarah’s PIP coverage benefitted her in this scenario
- Broad Coverage – Sarah benefits from a wider range of covered expenses, including lost wages and replacement services, which are not covered under MedPay.
- Financial Stability – The inclusion of lost wage reimbursement and coverage for replacement services helps Sarah maintain her financial stability and manage household responsibilities during her recovery.
- Comprehensive Protection – PIP provides comprehensive protection that addresses both medical and non-medical aftermaths of the accident, ensuring Sarah’s needs are fully met.
In this revised scenario, PIP coverage offers Sarah a more extensive safety net following the accident. It not only takes care of her medical expenses but also cushions the financial impact of lost income and the need for additional help at home.
This scenario highlights how PIP coverage can significantly benefit policyholders by providing extensive support beyond medical bills, illustrating its value in a well-rounded auto insurance policy.
MedPay and PIP coverage limitations
Understanding the coverage limits of Medical Payments (MedPay) and Personal Injury Protection (PIP) is crucial for ensuring you have adequate financial protection in the event of an auto accident.
Coverage limits essentially determine the maximum amount your insurance provider will pay for covered expenses per accident.
Here’s how these limits impact MedPay and PIP coverage and what you need to consider to ensure you’re adequately covered.
MedPay Coverage Limits
MedPay coverage limits are typically chosen when you purchase your policy. These limits can range from as little as $1,000 to $25,000 or more, depending on the insurer and the options you select.
The limit you choose is the maximum amount your insurer will pay per person, per accident for covered medical expenses.
It’s important to select a limit that reflects the potential cost of medical care following an accident, keeping in mind that medical expenses can escalate quickly, especially for serious injuries.
Choosing a higher limit provides greater protection but will also increase your premium cost.
PIP Coverage Limits
PIP coverage limits are often subject to state-mandated minimums in states where PIP is required. These minimums vary significantly from one state to another, with some states requiring as little as $3,000 in coverage, while others mandate significantly higher limits.
Like MedPay, the PIP coverage limit is the maximum amount your insurance will pay per accident for covered expenses, which include medical expenses, lost wages, and other specified losses.
Due to the broader scope of expenses covered by PIP, including economic losses like lost income, it’s advisable to opt for higher coverage limits if available and financially feasible. This is particularly important in no-fault states, where your ability to sue the at-fault driver for damages is limited, making your PIP coverage a critical component of your financial protection after an accident.
How Limits Affect Your Coverage
The coverage limits you choose directly affect the level of financial protection you have in the event of an accident.
Limits that are too low may not fully cover your medical expenses or other covered losses, leaving you to pay the difference out of pocket. This is particularly true for PIP coverage, where the costs associated with lost wages and ongoing rehabilitation can quickly exceed minimal coverage limits.
In contrast, higher limits offer greater protection but at the cost of higher premiums. It’s a balancing act between ensuring adequate coverage and managing premium costs.
Consider factors such as your health insurance deductible, potential lost income, and the financial stability provided by other savings or income sources when selecting your MedPay and PIP limits.
How to avoid overlapping coverage
When it comes to ensuring you’re fully protected in the event of an auto accident, having both MedPay and PIP coverage can offer comprehensive financial safeguards for medical expenses and other related costs.
However, it’s crucial to be aware of the potential overlap between these auto insurance coverages and your existing health insurance.
Understanding this overlap and how to navigate it is key to optimizing your coverage without paying for unnecessary protections.
1. Understand the Overlap Between MedPay/PIP and Health Insurance
Both MedPay and PIP cover medical expenses related to auto accidents, which is also the primary function of health insurance.
The overlap occurs because MedPay and PIP can cover the same medical bills that your health insurance might cover.
However, unlike health insurance, MedPay and PIP can provide additional benefits, such as covering deductibles and co-pays, offering coverage for passengers, and, in the case of PIP, compensating for lost wages and providing broader protection beyond just medical bills.
2. Evaluate Your Health Insurance
Start by thoroughly evaluating your existing health insurance coverage. Consider your health insurance deductible, co-pay amounts, out-of-pocket maximums, and any coverage exclusions, particularly those that might relate to auto accidents.
Your auto insurance MedPay or PIP coverage is generally considered primary coverage in the even of an accident. Your health insurance policy will most likely contain provisions that explain how it will pay if other coverage exists. This is known as Coordination of Benefits or COB.
Your health insurance may also include exclusions for accidents arising from commercial activity. As an example, if the accident occurred while you were driving for a rideshare company like Uber or Lyft, your health insurance may not cover your medical expenses.
Understanding these details will help you gauge the extent to which MedPay or PIP might offer additional necessary coverage.
3. Choose the Right Coverage
The following are some important considerations to help you choose the best MedPay or PIP coverage for your situation.
- Deductibles and Co-Pays – If your health insurance has high deductibles or co-pays, MedPay or PIP can be invaluable in covering these costs upfront, ensuring you don’t face out-of-pocket expenses after an accident.
- Coverage Gaps – Identify any gaps in your health insurance, such as exclusions for certain types of injuries or treatments. MedPay or PIP can fill these gaps, providing a safety net where your health insurance might fall short.
- Lost Wage Compensation – Unlike health insurance, PIP offers compensation for lost wages if you’re unable to work due to accident-related injuries. If maintaining your income in the event of an accident is a concern, PIP coverage becomes even more valuable.
- Passenger Coverage – Consider whether you frequently have passengers in your vehicle. MedPay and PIP extend coverage to your passengers, which health insurance does not cover, adding an extra layer of protection for those in your vehicle.
Strategies to avoid unnecessary coverage
Paying for duplicate coverage or buying coverage you don’t need doesn’t make great financial sense, so here are a couple of ways to minimize the chances of buying unnecessary coverage.
- Coordinate Benefits – Some insurers allow you to coordinate your MedPay or PIP coverage with your health insurance, using MedPay or PIP to cover deductibles and co-pays while letting your health insurance handle the bulk of medical expenses. This coordination can optimize your coverage and reduce overall costs.
- Tailor Your Coverage – Based on your assessment, adjust the limits of your MedPay or PIP coverage to complement your health insurance effectively. This might mean opting for lower limits if your health insurance provides comprehensive coverage with low out-of-pocket costs.
- Regular Review and Adjustment – Insurance needs can change over time, so it’s important to regularly review and adjust your MedPay, PIP, and health insurance coverages. Changes in your health insurance plan, your financial situation, or your driving habits (such as an increase in carpooling) can all necessitate adjustments to your coverage.
MedPay and PIP recap and agent thoughts
As we’ve explored the ins and outs of MedPay and PIP coverage, it’s clear that both play pivotal roles in crafting a well-rounded auto insurance policy.
MedPay offers a straightforward approach to covering medical expenses for you and your passengers, irrespective of fault, making it a critical addition for immediate medical treatment post-accident.
PIP coverage, with its broader umbrella of benefits, further enhances your financial safety net, particularly in no-fault states or situations where comprehensive protection is paramount.
Balancing these coverages with your existing health insurance is really the key to selecting the right level of coverage.
It’s about understanding where one leaves off (MedPay and PIP) and the other picks up (health insurance), ensuring you’re neither under protected nor paying for unnecessary overlap.
The optimal level of MedPay or PIP coverage is determinant upon your individual health insurance policy, so it’s important that your agent or provider has intimate knowledge of your health care plan when setting up the proper coverage limits on your car insurance policy.
Engage with your insurance provider, ask the right questions, and don’t hesitate to seek clarity on any aspect of your coverages. As your circumstances evolve, so too should your insurance coverages.
During his career as an independent insurance agent, Ryan Grabenstein was appointed with Progressive, Allstate, Nationwide, Travelers, and many smaller regional and mutual companies. He has a Bachelor's degree in Finance from the University of Nebraska at Lincoln and Certified Insurance Counselor (CIC) personal and commercial lines training.