In this blog I discuss the concept of Personal Injury Protection associated with a Florida Personal Auto Policy. I prefer to discuss Personal Injury Protection before any other coverage on a Personal Auto Policy because once you understand Personal Injury Protection, the concepts of Bodily Injury (BI) and Uninsured Motorist (UM) become easier to understand. I assure you this will not be as enjoyable of a read compared to a sappy romance novel but I will try to make it more entertaining than reading the owner’s manual for an electrical appliance. So let’s dig into this a bit because this is an important coverage. Stick with me while I get through some of the technical stuff.
Personal Injury Protection (AKA: PIP or No Fault Insurance) was introduced into Florida Law on January 1st 1972. Florida became the second State to adopt the no-fault insurance plan. The no-fault plan was considered to be a method of tort reform (reduce court cases) and to provide a mechanism to quickly and efficiently compensate the injured parties of an auto accident regardless of fault. The State of Florida statutorily requires the coverage of personal injury protection (PIP) as described under the Florida Motor Vehicle No-Fault Law (F.S. 627.730-627.7405). This compulsory coverage of your auto policy is specific to injuries as a result of a motor vehicle crash. Personal Injury protection (PIP) is a “first party” benefit meaning this coverage applies to the named insured, a listed driver on the policy or any other person as defined as an Insured under the policy. PIP is primary against all other forms of medical insurance coverage with the exception of workers compensation. The limits of this coverage are usually $10,000 per accident.
Whew! Let’s stop here and make sure we understand what has been said so far. PIP is required by law. If you own a vehicle registered in Florida, you are required to have a Florida auto insurance policy. Your Florida insurance policy will include Personal Injury Protection (PIP). The PIP coverage on your auto policy is for your medical bills as a result of your injuries from an auto accident and pays before any other insurance policy you may have. The amount of coverage associated with your PIP is $10,000. It does not matter who was at fault in the accident, your PIP pays for your medical bills; hence the term “no-fault insurance”. Let’s look at a simple scenario to apply this concept.
Example 1:
Jane is stopped at a red light. Jack does not see Jane stopped in front of him. Jack’s car crashes into Jane’s car. Both Jane and Jack are injured.
In this example Jack is clearly at fault and responsible for Jane’s injuries. However, Jack’s PIP will pay for his medical bills and Jane’s PIP will pay for her medical bills.
Ok, so now we understand the basic concept. Let’s take this a little further. As noted above, the amount of coverage associated with the PIP benefit is $10,000. But it is not that straight forward because the basic form of PIP (which is what we will primarily be discussing) pays 80% of your medical bills up to a maximum payout of $10,000. Let’s revisit Example 1 again but now we will introduce some math to illustrate how PIP will pay for the medical expenses associated with an accident.
Example 2:
Jane is stopped at a red light. Jack does not see Jane stopped in front of him. Jack’s car crashes into Jane’s car. Both Jane and Jack are injured.
Jane has gone to the doctor and has $15,000 of medical bills because of the accident. Jack has gone to his doctor and has $6,000 of medical bills because of the accident. How much will Jane’s PIP coverage pay? How much will Jack’s PIP coverage pay?
- Jane’s PIP policy will pay $10,000 of her $15,000 of medical bills because 80% of $15,000 equals $12,000. Her maximum PIP benefit is $10,000.
- Jack’s PIP policy will pay $4,800 of his $6,000 of medical bills because 80% of $6,000 equals $4,800. The PIP benefit pays up to the maximum of $10,000.
That was pretty easy. Notice in my examples I have not talked about how the nature of Jack and Jane’s injuries have impacted their lives. That is because PIP only deals with the medical bills associated with the injury(s). The other aspects of an injury associated with an auto accident will be discussed later under the topics of Bodily Injury (BI) and Uninsured Motorist (UM).
Stay with me because there are a few more concepts I want you to know. In order to help reduce the expense of the premium associated with PIP, you can purchase a deductible. This is where we need to be very careful in our understanding of how we purchase PIP insurance. The concept of a deductible is simple enough. It is the amount the individual has to pay before the insurance company pays. Once the deductible is met, the insurance will pay the remainder of the claim up to the policy limits. But PIP is different. Did you notice in Example 2 how Jack’s medical bills were not fully paid even though his bills were less than $10,000? Why? Because….PIP pays 80% of the medical bills up to $10,000. This means essentially there is a 20% co-insurance built into the basic form of PIP. What happens when we introduce a deductible of $1,000 to Jack’s policy?
Example 3:
Jack has $6,000 in medical bills from an auto accident. He has basic PIP with a $1,000 deductible. How much will his PIP benefit pay?
A) $4,000
B) $3,800
C) None of the above
The answer is B. The PIP insurance benefit will pay $3,800 of his $6,000 in doctor bills. Here is how the math works:
$6,000 (total bills) x 80% (what basic PIP pays) – $1,000 (deductible) = $3,800
Now that we have the fundamentals, think about this for a minute. Here is the set up…….
Example 4:
Jane owns a car and has a Florida insurance auto policy. Jack is driving his car and hits Jane who is a pedestrian taking a walk in her neighborhood. How are Jane’s medical bills paid?
A) No coverage
B) Jack’s insurance will pay for Jane
C) Jane’s PIP will pay for her medical bills
The answer is C. Remember; PIP pays for medical bills associated with an auto accident. In this example, Jane was in an auto accident, she just happened to be a pedestrian. Would PIP pay for Jane’s medical bills if the circumstances in this example were the same except Jane was on a bicycle? The answer is Yes. But be careful not to extrapolate this out too far. The next “logical” scenario might be to put Jane on a motorcycle. In that case all bets are off and I will refer you to your motorcycle insurance policy. I will save that conversation for another day.
**ALERT**
There is an important exception to the PIP law and that is what happens when you cross the Florida State line. The “rule of thumb” is; out of State, out of vehicle, out of luck. So if you are traveling to another State your PIP will provide you coverage as long as you are in your automobile. If you are a pedestrian in another State or in someone else’s vehicle in another State, your PIP will not provide coverage.
There are a few more interesting and noteworthy concepts associated with PIP. Basic PIP includes reimbursement for loss of wages at 60%, a death benefit up to $5,000 and it will pay for “replacement services” where for example you have to hire a lawn service to mow your yard because your injury prevents you from doing it yourself as you had prior to the accident. Again, the maximum payable is $10,000.
Finally, some insurance companies will allow you to modify the basic form of PIP. There is extended PIP which pays 100% of your medical bills and 80% of lost wages up to $10,000. So basically this eliminates the 20% co-pay provision built into basic PIP and increases the amount of lost wages reimbursement. Other companies will offer additional PIP where you can raise the limit of $10,000 up to higher increments. As mentioned previously, you can include a deductible with the coverage. You may also be able to eliminate the provision for the loss of wages compensation. Depending on your auto insurance company, these options may be available to you.
Personal Injury Protection is a very complicated concept and I have only scratched the surface of possible PIP scenarios in this blog. My intent was to introduce you to the fundamental understanding of the coverage. If you only remember one thing I would ask that it be; Your PIP pays your medical bills as a result of an auto accident regardless of who was at fault. Understanding this will help you to understand why Bodily Injury (BI) and Uninsured Motorist (UM)coverage is important.