- PIP insurance is designed to cover the medical expenses of somebody involved in a motor vehicle accident. It works on the basis that the policy pays for the medical costs of the policyholder. Unlike auto insurance for the costs of damage to a car, a PIP policy does not pay the costs of anyone other than the policyholder.
- PIP works on a no-fault basis. This means that a person with PIP insurance will automatically be covered for his injuries. This coverage does not rely on other people in the accident being covered. The other people involved in the crash do not have to be proven at fault, and there is no requirement for the person covered by a PIP to be proven "innocent" in the accident.
- As of 2011, nine states (Florida, Hawaii, Kansas, Michigan, Massachusetts, Minnesota, New York, North Dakota and Utah) require all drivers to have PIP insurance. Three states (New Jersey, Pennsylvania and Kentucky) require drivers to either have PIP insurance or traditional auto insurance.
In association with these requirements, the states have laws that severely restrict the ability of a driver to sue another driver for personal injury costs based on responsibility for a crash. - While details vary from state to state, a PIP policy will not necessarily cover all medical costs. For example, in Florida policy will only pay up to 80 percent of costs. Coverage for the remaining 20 percent can be bought for an additional fee.
A PIP policy may also cover lost wages that result from injuries in an auto accident. It may also cover related expenses such as having to hire domestic help.
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