by Ed Sneineh, ChFC

'First Party' coverage in car insurance is related to the coverages which the policy offers to the individual insured, as opposed to 'third party' or other people. Two of the most essential components of car insurance coverage are Medical Payments (Med Pay) and Personal Injury Protection (PIP). The type of insurance coverage elected  will fluctuate depending on what is requested in and by the individual state. It is very necessary to realize these two very different kinds of insurance coverage and how it will affect any potential car insurance claims.

Both Medial Payments Coverage and Personal Injury Protection are considered 'first party coverage.' This means that it applies to the named insured or member of the insured's household, the passengers of the insured and certain others on occasion.

Understanding Medical Payments (Med Pay)

Medical Payments Coverage is required in some states that do not have 'No Fault' laws in place. Med Pay Coverage will pay for reasonable medical and burial  expenses caused by bodily injury or death that is caused by an car accident.

The limit of liability for Med Pay Coverage is stated in a car insurance policy declaration page. There is a limit on medical payment coverage. This is the limit per qualified injury related to the accident. Ultimately, Med Pay Coverage will allow for the injured party to receive medical treatment and not worry about the costs associated with that treatment.  The most normal limits on Medical Pay are $1,000 to $5,000 per person, although a limit of $25,000 is obtainable with some companies, normally preferred companies. Certain non standard companies have at most $1,000 per person! Normally, comparing auto insurance quotes are ones that are associated with low liability and medical payment limits.

Understanding Personal Injury Protection (PIP)

Which party is to blame for paying for bodily injury when there is an automobile accident? You, or the other driver?  In states that follow the "tort liability" system, the individual that caused the damage is the one that is held  legally responsible for paying all the damages. What about if you were, in some way partially responsible for an accident, who will pay for your bodily injury? To exclude the practice of the driver regarded not to have induced an accident having to sue the other operator's insurance company to pay for damages, PIP policy was 'created' to handle that issue. States that adopt PIP policy are called the "no fault" states. Fifteen states besides the District of Columbia make it compulsory to follow the 'no fault' system, hence requiring auto insurance policies to include the Personal Injury Protection or PIP. These states are: Delaware, Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Oregon, Pennsylvania, Texas, and Utah.

Illinois is one of the states that still offer the traditional "tort liability" systems in which there are no boundaries on car related law suits.  To get paid for your bodily injury you must sue someone, and you may win based on the realities that your  opponents were negligently irresponsible and brought on your bodily injury that specifically caused your injury, loss, and suffering. That is why medical payment is even more important in Illinois: You do not have to sue any one to take it. Keep in mind that the fact that Illinois, or any similar state, is not an 'at fault' state, it does not preclude automobile insurance companies to amend their policies to include the PIP. But with the intense competition among car insurance companies, only few give the choice to have the PIP amendment, at extra higher price, of course.

Limits and Coverages:  Even though PIP minimum coverage limits are different between participating states, they are similar in that the benefits usually cover most injury-related expenses including: medical expenses, lost income as a result of injuries, compensation for loss of services, funeral expenses, and death benefits. The PIP can also cover bills associated with certain psychiatric assistance in connection with bodily injury, physical or occupational therapy and any rehabilitation expenses associated with auto insurance claims.

Generally, damages such as pain and suffering, and emotional distress and inconvenience are not covered by no-fault insurance coverage. Also, PIP does not provide any protection for any injury attributable to work related car accidents.

Finally, if you live in a 'no fault' state, there is one reason to not purchase both Med Pay and PIP insurance. There is a duplication in coverage. This is because PIP insurance provides more coverage in case there is a need to file medical claims related to an auto accident,  irrespective of fault.

PIP Deductible: Most people in 'no fault' states are used to the PIP policy with no deductibles, although there are many companies offering PIP with deductible.

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Ed Sneineh, Financial services professional for over 20 years.
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