PIP Coverage: Who Needs It, and What It Does

As you reach adulthood, you must learn some lessons if you’ll find success in life. For instance, you need to learn about insurance and the kinds you need. You probably understand that you need health insurance to pay for medical necessities. You’ll need homeowner’s insurance if you buy a house, and several other kinds as well.

You might also find out that you require PIP insurance. However, because state laws differ, not everyone needs it. New York drivers must have at least $50K in PIP insurance, for instance, but someone in another state might not need one of these policies.

In this article, we’ll give you a breakdown of PIP insurance. We’ll discuss what it does, who needs it, and how extensive of a policy to get. 

What Does PIP Insurance Involve?

PIP stands for personal injury protection insurance. You need this if you want to drive legally in several states. Many more states don’t need it, though.

You need personal injury protection insurance in states that have “no-fault” status. This means that if you and another driver hit each other in one of these states, it doesn’t matter from the standpoint of the insurance company who caused the collision. Rather than the person who caused the accident paying for the damage to your car and theirs with their insurance, you each pay for your car’s damage with your individual insurance policies.

This stands as a contrast to “at-fault” states. In these states, if you cause a car accident, then your insurance has to pay for it. 

You might feel like an at-fault or no-fault system makes more sense. However, your opinion doesn’t really matter. If you drive without PIP insurance in a state that requires it, and you cause an accident, then the other driver can sue you, and they will probably win.

States that require PIP insurance also demand a specific amount. Keep in mind, though, that you can buy policies worth more than the minimum. This makes sense if you’re worried that the policy amount you have won’t completely cover an accident that you caused. 

Who Needs It?

Only drivers who live in states that have no-fault status legally need to have PIP insurance. At the moment, twelve states have no-fault status, meaning that thirty-eight don’t have it.

While at-fault states remain the majority, some of the states that have no-fault status include New York, New Jersey, and Florida, all of which have a high population density.   

You can always move from a state that has no-fault insurance to one that has at-fault status. If you do, then you won’t legally need to carry one of these policies. It’s true that’s one less expense you must cover as a driver, and that might appeal. 

However, most people don’t think it’s such a big deal that they’ll move for that specific reason. You might pay a few hundred dollars for minimum PIP coverage in a state that requires it, but probably no more than that. 

How Large of a Policy Should You Get?

We mentioned earlier that if you live in a state that requires PIP insurance, you must have a minimum amount. You can go on your state’s official website and look in the automotive section to figure out how much you must carry. Failing that, you can probably just Google it and get the answer.

Most people get the minimum amount and feel that’s sufficient. As previously mentioned, though, you can get a more robust policy. You can buy one that’s worth $100K in protection, for instance, even if your state only says you must have a minimum of half of that. 

It’s all about how much risk you want to take. The minimum amount means you can legally drive, assuming you have a valid driver’s license. 

If you’re someone who worries about a potentially disastrous situation long before it occurs, though, you may feel better driving with a large policy. If anything goes wrong, making that decision beforehand could end up saving you a substantial out-of-pocket payout.

Should You Pay for It Every Month, Quarter, or Year?

You must also decide if you should pay for PIP insurance every month, quarter, or year. Many people pay for it each month. 

They can mark it on the calendar and pay their insurance company in much the same way they’ll make a mortgage or rent payment. You can also probably set up autopay and have the insurance company take the money directly from your bank account if you feel like you might accidentally forget about it.

If you want to pay for it every year, though, that could make more sense, assuming you can afford to pay a few hundred dollars as a lump sum. You might grumble when you do it, but then, it’s out of the way. You won’t have that monthly expenditure, and that’s probably something you could do without.  

What About if You Move to Another State?

If you move from a state that has mandatory PIP insurance to one that doesn’t require it, you can cancel your policy. If you pay for it month by month, you shouldn’t have too much trouble with that. 

You can simply contact the insurance company once you’ve completed the move and cancel online or over the phone. They might refund your money for the rest of the month if you are lucky.

If you paid for the whole year in advance, then you might get a refund worth a couple of hundred dollars, and you will certainly want that. If you just moved, that money will doubtless come in handy.

Some people like the idea of not having PIP insurance better than having it, but both systems seem to work fine. It comes down to a states’ rights issue. A few states like the no-fault idea and stick with it, while most prefer to have at-fault drivers who cause a crash cover the damages with their insurance.