What Are the Differences Between PIP and Med Pay Coverage On Your Auto Policy?

Posted On July 13, 2016 In Personal Injury

If you or loved ones are involved in a car accident, lacking certain types of coverage means you may not be fairly compensated for injuries. Understanding the differences between certain types of coverage is a matter of significant importance.

If your Texas auto insurance policy does not have personal injury protection (PIP) coverage or medical payments coverage (also called Med Pay coverage), you should finish reading this blog. People who lack PIP or Med Pay coverage may not have the resources needed to pay for medical bills, rehabilitation, lost wages and other costs associated with serious injuries.

It is also extremely important to know the differences between PIP and Med Pay coverage because Texas law does not allow both on an individual policy! Keep in mind, we are only discussing Texas insurance policies. If you are from another state, insurance requirements and laws will be different.

PIP coverage:

• Insurance companies are required under Texas law to automatically provide $2,500 PIP coverage, but because policyholders can opt to reject it, many people do not have the coverage.

• PIP coverage pays for 100 percent of medical expenses and rehabilitation therapies. This can include physical therapy, prosthetics and other necessary medical needs after surviving an auto accident.

• PIP coverage pays 80 percent of lost income.

• PIP coverage is not subject to subrogation in Texas. This is an important point because subrogation is the process insurance companies use to pursue reimbursement. People with PIP coverage on their policies will not be required to return PIP payments paid out after an accident. For example, if you settled with an at-fault driver’s insurance company for $8,000, but had $3,000 in PIP coverage, you would not have to return the $3,000 after settling because PIP is not subject to subrogation (meaning you keep $11,000 total instead of $8,000)! It helps to think of ‘subrogation’ as a fancy word for reimbursement.

Med Pay coverage:

• Unlike normal health insurance policies, Med Pay coverage has no deductible. For those of you unfamiliar with one of the unpopular aspects of health insurance policies, a deductible is the amount of money that you must pay before insurance covers a claim.

• Like PIP coverage, Med Pay coverage will cover the cost of hospital bills regardless of who is at fault, but it does not pay lost income. If you were to need a month off work to recover from your injuries, Med Pay coverage would cover your medical bills but not your month of lost income.

• Med Pay coverage is subject to subrogation and insurance companies can recover costs from claims. So if we use our example again of an $8,000 settlement, $3,000 in Med Pay coverage would mean you keep $8,000 and not $11,000. This is because you would have to reimburse the Med Pay payments out of your liability settlement.

• Unlike PIP, insurance companies are not required to offer Med Pay coverage.

Should I Get PIP or Med Pay Coverage for My Texas Auto Insurance Policy?

The differences between PIP and Med Pay coverage should ring alarm bells for Texas auto insurance policyholders. Let’s say for example you were to suffer multiple broken bones from a car accident. If you lacked PIP coverage or had the minimum amount required, you would be in trouble. Medical bills and lost income from missing work could create a financial catastrophe for you and your family. Even with minor injuries, not having PIP coverage could spell disaster. You would receive less money for your injuries with Med Pay coverage because it is subject to subrogation.

Several weeks ago, we wrote a blog discussing how you could discover what was on your insurance policy. Details on whether you have Med Pay, PIP or none-of-the-above would be listed on your policy’s declarations page.

The Texas personal injury attorneys at Mike Love & Associates, LLC would be happy to review your insurance policy at no cost. We can tell you what types of coverage you have and what types of coverage you are lacking.