Auto Insurance Basics (Part 3)
Most states require drivers to carry some kind of auto insurance before they will issue a car registration, so it is a policy you cannot avoid if you own a car. The lingo of car insurance can be particularly difficult to understand, but it is worth learning if you don’t want to pay excessive premiums.
Medical coverage, known asAï¿½med pay,Aï¿½pays doctor and hospital bills-as well as funeral expenses, if needed-brought about by injuries that you and your passengers sustain in a car accident. Med pay also kicks in if you or a family member is hit by a car when walking as a pedestrian or if you or a family member is hurt when riding in someone else’s car. Medical bills are covered up to the limit specified in the policy, regardless of who causes the accident. Most policies limit coverage for each injured individual in a car, up to as much as $5,000 apiece. For example, if three people are in your car when you have an accident, the insurer may have to pay as much as $15,000 in medical bills.
Some people skimp on med pay coverage because they figure that their bills will be covered by their health insurance. Economizing on such coverage, however, is usually not a good idea for two reasons. First, while your health insurance may be top-notch, your passengers may not have good coverage. (If you don’t have good health insurance coverage, med pay is even more important.) Second, med pay covers funeral expenses, which are not reimbursed by health insurance. For the relatively small med pay premium, the extra coverage is worthwhile. In some states, med pay is not optional, so you don’t have a choice over whether to carry it or not.
In states with no-fault insurance laws,Aï¿½personal injury protectionAï¿½(PIP) covers a broader assortment of medical charges than med pay does. In addition to covering doctor’s bills, PIP also replaces lost wages or pays to replace the services of someone injured in a car accident. For example, if a stay-at-home mother is laid up because of an auto accident, PIP payments would cover baby-sitter fees until the mother can care for her children again. PIP is often required in states with no-fault plans though it is also usually available in states assessing fault. It is relatively inexpensive and usually worth adding to your policy.