Personal injury protection (PIP), also known as “no-fault insurance,” is a component of an automobile insurance plan that covers the healthcare expenses associated with a car accident. PIP covers medical expenses for both injured policyholders and passengers, even if some don’t have health insurance.
If the cost of necessary medical care exceeds the auto insurance policy’s PIP limits, health insurance sometimes covers further expenses. Policies have a per-person maximum, meaning that coverage is limited to a certain amount per person if multiple people are injured in an accident.
Auto insurance requirements and features differ from state to state, and PIP coverage is available primarily in no-fault states. In a no-fault state, if a policyholder is injured in a car crash, that person's policy pays for the holder’s medical care regardless of who caused the accident. Policyholders with PIP coverage can receive benefits even if the other driver doesn’t have insurance.
PIP coverage, in addition to making medical care affordable, often provides payments for lost income, child care, and funeral expenses related to the accident. Some no-fault states offer medical payments coverage, but it typically has low limits and does not pay for these other costs.
PIP auto insurance is required in Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania, Utah, and Puerto Rico. It is a compulsory add-on to auto insurance in Arkansas, Delaware, Maryland, Oregon, and Texas and an optional add-on in New Hampshire, South Dakota, Virginia, Washington, Wisconsin, and Washington, D.C. That’s a grand total of 22 states, one territory, and one federal city.
Minimum coverage requirements are set by the above entities’ governments and can vary. Maximums are set by insurance companies and can also vary, but they are usually no more than $25,000.
If you live in a state that requires PIP, then yes, you need to have PIP coverage. The question then becomes how much you should get. If your health insurance provides coverage for injuries and rehabilitation related to a car accident, you may only need to purchase the minimum amount of PIP required by your state. Similarly, if PIP coverage is optional in your state, you'll want to look at your health insurance to see how it covers expenses related to car crashes, as well as your deductible and out of pocket maximums, to help you decide.
PIP is not a substitute for liability insurance, which is required by every state (plus Puerto Rico and Washington, D.C.), except for New Hampshire and Virginia. Liability insurance pays for injuries caused to another party, such as a pedestrian or the driver and occupants of another vehicle. There's also professional liability insurance; such policies are generally taken out by financial advisors, business owners, landlords, doctors, lawyers—anyone at risk of being sued for damages and/or injuries.