Why You Should Consider Buying More No-fault PIP Coverage

If you have automobile insurance in Hawaii, you probably know that Hawaii law requires you to carry a minimum of $10,000 in no-fault personal injury protection (“PIP”) coverage. PIP is optional on motorcycle policies. If your budget will allow, there are several reasons why you should consider increasing your PIP coverage.

What is no-fault PIP?

No-fault PIP, as the name suggests, covers the cost of medical treatment for injuries suffered in a motor vehicle accident regardless of who is at fault. PIP covers you and your passengers in your insured vehicle. PIP also covers health care treatment for pedestrians, bicyclists, and moped operators who are injured by a third-party’s insured vehicle.

Reasons to Buy More PIP

1. Dollar-for-dollar, PIP is arguably the best deal in insurance. Most automobile insurers sell extra PIP coverage in increments of $10,000, up to a limit of $50,000 or even $100,000. Purchasing extra PIP is generally inexpensive compared to other types of insurance, and PIP covers the activity which, for most people, poses the single greatest risk of traumatic bodily injury—motor vehicle use. If you have a good driving record, buying more PIP might add only a few dollars to your annual car insurance premium while significantly increasing your protection against the risks posed by uninsured and underinsured drivers.

2. The minimum required PIP coverage is insufficient protection when the cost of health care is rising much faster than the general rate of inflation. If you are seriously injured an automobile accident, you will likely require paramedic care and ambulance transportation to a hospital, examination by multiple doctors, and extensive testing, including pricey MRI and CT scans. You may also need surgery to repair fractures and/or need to stay one or more nights in a hospital. The cost of such care can exhaust $10K of PIP coverage within just hours of an accident.

3. PIP is often portable—you don’t need to be in your insured vehicle for your PIP to cover automobile-related injuries. If you are a pedestrian, cyclist, or moped operator injured by an uninsured driver, or you are injured while a passenger in an uninsured vehicle, your PIP will usually cover you. Plus, PIP can act as secondary coverage if you purchase more than required by law. With the rising rates of pedestrian-automobile accidents in Hawaii, if you are a pedestrian hit by a vehicle with only minimum PIP coverage, and you have purchased $50,000 in PIP on your own auto policy, your PIP will begin paying once the driver’s PIP coverage is exhausted, adding $40,000 for medical care if you need it.

4. PIP usually has no “per occurrence” coverage limit. What this means is that PIP coverage limits are usually “per person per accident,” so every injured person can access the full amount of the coverage, no matter how many people are injured. That differs from other types of automobile insurance, such as liability coverage, which is generally sold with a “per occurrence” or “per accident” maximum, despite the number of people injured. For example, if you and your three passengers are injured in an accident in your vehicle covered by $20,000 in PIP, all four of you will each have $20,000 in PIP available to pay resulting medical expenses.

5. PIP covers alternate forms of treatment often not covered by standard health insurance. Most private health insurance plans and government plans such as Medicare either do not cover chiropractors, massage therapists, and acupuncture, or the they charge an additional premium for doing so. PIP, however, usually covers such alternate therapies, giving injured people more options for recovery.

6. PIP usually pays 100% of the cost of reasonable and necessary treatment incurred within 72 hours of a covered accident, up to the coverage limit, and unlike most health insurance plans, PIP generally does not have any deductible or co-pay requirement. (After 72 hours, PIP pays based on the worker’s compensation fee schedule, a drawback discussed below. Some insurers will slightly reduce premiums if you elect a deductible or co-pay on your PIP coverage—an option you should decline because the miniscule savings do not justify the added risk.)

7. You probably won’t need to reimburse your automobile insurer for PIP payments from a bodily injury settlement. If your injuries are caused by a negligent third party, and you are paid to settle your resulting liability claim, most health insurance plans, whether public or private, will seek reimbursement from you for any benefits duplicated in the settlement (i.e., you will not be able to get double recovery). If your health insurer pays bills for which you later recover money in settlement, your health insurer will ask you for a refund. If you settle your case for general damages only, net of the covered loss deductible, however, most auto insurers will not pursue a reimbursement claim for PIP benefits paid.

8. The statute of limitations (SOL) for any third-party personal injury claim related to your PIP covered treatment is extended to two years from the date of the last PIP payment. Depending on the extent of your injuries and the duration of your treatment, the more PIP coverage you have, the longer the (SOL) will be extended after the date of the motor vehicle accident.

Although there are many compelling reasons to increase your PIP coverage, PIP has a few downsides and potential pitfalls which you should be aware of:

As mentioned above, do not select the deductible, co-pay, or managed care options on your PIP coverage, if your insurer offers them. You will save very little on your premium and regret the choice if you are injured and need to use the coverage.

Some doctors and other health care providers will not accept PIP beyond the first 72 hours following an auto accident, during which period PIP pays the full “retail” amount billed. As mentioned above, for treatment rendered outside the 72-hour window, PIP pays claims based on the highly discounted worker’s compensation fee schedule established by the State. If you need long-term rehabilitative care, such as physical therapy, you will need to find a provider that accepts PIP. Be prepared to call around.

No matter how much PIP coverage you carry on your auto policy, be aware that your treatment, depending on the severity of your injuries, could exhaust your PIP coverage. As you treat for your injuries, you need to be aware of how much PIP you have remaining available and be sure to inform your health care providers to begin billing your personal health insurance plan when and if PIP exhausts. If you fail to advise your health care providers to begin billing your personal health plan upon PIP exhaustion, you may get stuck paying the bills yourself. Most private health plans will reject claims for charges more than one year old.

Robert Klein