By Michael Giusti
Neck braces may be the iconic worst-case scenarios of traffic accidents, but depending on your insurance policy, the real nightmare may be determining who is on the hook for those medical payments.
Auto insurance policies have two potential riders that could cover health care costs that result from an accident — the medical payments clause and the personal injury protection clause. They are subtly different in what they will cover, and they are optional in many states.
And experts say that deciding whether they are good values for you or whether they are good places to trim your auto insurance bill depends on several different things.
What’s the difference
Medical payments clauses cover just what they say: doctor’s bills that result from your traffic accident. Your policy will typically cover you or anyone else in your vehicle, up to the limits defined in your policy. According to the New York-based Insurance Information Institute, in some states, your policy will pay for the injuries of anyone in your vehicle, whether the accident was your fault or not.
Personal injury protection, also known as PIP, also covers those medical bills, but it goes a little farther. Personal injury protection can also pick up costs incurred because of wages lost due to the auto accident. Personal injury protection can often also cover other services, such as child care, that the injury is preventing you from doing yourself.
Some states require personal injury protection coverage, others have it as an option, and some only offer medical payments coverage. Check with your policy and your state to determine what coverage is available for you.
What they cover
Both types of coverage differ from bodily injury and uninsured motorist coverage. Those policies actually relate to other people. Bodily injury coverage is a policy that protects you from liability in case you injure someone else in an accident. Your bodily injury policy will cover their medical expenses.
Uninsured motorist coverage protects you in case you are injured in a crash that was someone else’s fault in which the other driver did not carry insurance that would cover your medical bills.
These policies have two-part limits, written as something like 100/300. The first number is how much protection there is for each person, and the second number is for how much protection there is for the entire accident.
So, for this example, each person would have $100,000 in coverage, but the policy wouldn’t pay more than $300,000 total, presuming multiple people were hurt.
To further confuse the matter, there are actually two types of medical payments policies: medical payments and excess medical payments.
Excess medical payments works just like the medical payments clause, with the exception that it is meant to work as a piggyback policy with your personal medical insurance. The excess medical payments policy would cover anything that wasn’t covered by your medical insurance, such as deductibles, co-pays, etc.
Do you need it?
In states where personal injury protection or medical payments coverage is optional, the question remains whether it is well-spent peace of mind or just unnecessary extra coverage.
“This type of insurance is optional in Ohio,” said Robert Denhard, spokesman for the Ohio Department of Insurance. “Consumers should review their life and health insurance protections and work with their insurance agent for help determining if other coverage is sufficient or if MedPay would be a wise insurance protection to add.”
It is a similar story in Louisiana, according to Judy Wright, spokeswoman for the Louisiana Department of Insurance.
“There is no statutory mandate in Louisiana that requires motorists to purchase medical payments coverage,” Wright said. “The Louisiana Department of Insurance does not recommend a limit. The coverage limits are established by the companies and each policyholder has the discretion to select his or her own limit.”
One line of thinking in the industry is that these supplemental medical policies are especially good ideas if you regularly transport a lot of people in your car. Whether it is for regular family trips or weekly carpool, these policies might be good extra protection.
Another aspect to keep in mind is whether you already have good health insurance. People with so-called “Cadillac plans” might not need the extra protection as much as someone with a high-deductible health insurance plan, for example.
Wright said that each person should carefully examine their own situation to determine insurance needs.
“Medical payments coverage is purchased at the discretion of a policyholder who may have other coverage such as health insurance negating the need for medical payment coverage,” she said.
Denhard agreed that each person should carefully consider their own needs.
“It’s not uncommon for people to secure an additional $5,000-$10,000 worth of protection,” he said.
If you do have multiple forms of coverage such as a medical payments clause and personal health insurance policy, then you would be wise to read each policy carefully.
Depending on how they are written, certain policies have “reimbursement clauses,” “duplicate payment clauses” or “subrogation” clauses. In short, that means that they will pay for your expenses, but if you get a settlement later, you would have to repay the company from that settlement.
So, for example, if your auto policy’s medical payment clause required repayment, but your personal health policy didn’t, it might be wise to forego the auto policy’s medical payments clause altogether and just use your personal health insurance for your doctor’s bills so you could keep the settlement in your pocket. Every policy differs, however, so make sure to read carefully before proceeding.
What is never allowed, however, is to get paid twice for the same claim.
So, as you weigh the benefits against the cost, the complete picture of risk versus benefit should be the key deciding factor, especially if price is the primary factor driving your insurance-buying decision.
Denhard said that in Ohio, the extra protection adds between $15 and $20 to the typical policy.