PIP vs. Med-Pay
PERSONAL INJURY PROTECTION (PIP) AND MED-PAY COVERAGES
Texas offers two additional benefits an insured can elect when deciding on coverages for a new personal auto policy. One benefit is Personal Injury Protection, which is commonly referred to as PIP, and the second benefit is Med-Pay. While Texas requires that Personal Injury Protection coverage, but not Med-Pay, be offered on every new auto policy, Texas permits the insured to reject that coverage. However, the rejection must be in writing and signed by the insured. The requirement that PIP coverage be offered on auto policies only applies to new policies, it does not apply to policy renewals.
The amount of PIP coverage you have on your policy, if selected, can vary depending on the auto insurance company chosen. The state minimum coverage for PIP is $2500; however, some insurance companies offer PIP coverage of $5,000, $10,000, or even $50,000.
PIP and Med-Pay cover the policyholder, family members living in the same household, a person driving the insured vehicle with permission, and passengers in the insured’s vehicle. PIP and Med-Pay also cover an insured person involved in an auto-pedestrian accident when the insured is struck by a vehicle. However, to be eligible for these benefits, coverage must be in-force on the date of the accident.
Unlike PIP, Texas does not require the insurance companies to offer Med-Pay coverage even for new policies. Therefore, if Med-Pay coverage is desired, the insured must specifically ask for this coverage. Additionally, there is no minimum amount of Med-Pay coverage that must be offered, so each insurance company is free to provide their own amount of Med-Pay coverage which can range from $500 to over $25,000.
WHAT ARE THE DIFFERENCES BETWEEN PIP AND MED-PAY COVERAGE?
Despite the premiums (cost) for Personal Injury Protection and Med-Pay coverage being almost the same, there are considerable differences between the two benefits:
While PIP and Med-Pay both cover medical and funeral expenses, Med-Pay does not cover lost wages. PIP will cover 80% of lost wages and pay for essential services like child and lawn care.
PIP benefits payable because of a loss are valid for three years, whereas Med-Pay benefits may only be valid for one year, so it’s important to check your policy terms and conditions.
PIP benefits are not subject to rights of subrogation (reimbursement) whereas Med-Pay benefits are subject to reimbursement. What this means is, if you are involved in an accident and you collect $2,500 in PIP from your insurance, and you get a recovery of $30,000 from the at-fault driver’s insurance, you net $32,500. If you collect $5,000 in Med-Pay from your insurance, and you get a recovery of $30,000 from the at-fault driver’s insurance, you must pay the $5,000 received in Med-Pay benefits back to your insurance company, so your net is only $30,000.
Because PIP and Med-Pay premiums are very similar in cost, because PIP provides more benefits than Med-Pay, and because PIP benefits do not need to be repaid if you get a recovery from the at-fault driver’s insurance, our office always recommends that insureds elect PIP benefits on their policy and not Med-Pay.