What Medical Expenses Are Covered By Auto Insurance?

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Unless you’ve had an insurance professional explain your coverage in line-by-line detail, you may not know how well you’re covered–or how well you’re NOT covered.

Unfortunately, I’ve found that most people don’t learn about certain insurance coverage options until they’ve needed them. Sure–you live, you learn, but it’s in your control to learn about the protection you have or don’t have. Don’t make the mistake of waiting until you try to place a claim to discover the real value of your policy, and don’t let any insurer ever under-value your protection.

One coverage option that a lot of people have been asking me about recently has to do with what coverage they have to pay for medical expenses–their own medical expenses, the medical expenses of passengers or those injured if they cause an accident, and how much coverage they have. This is likely on people’s minds because of healthcare reform, which WILL slightly affect how people choose auto insurance coverage options and limits.

Different types of injury are covered in different ways on your policy, and depending on what state you live in and what insurer you’re with will determine the amount an auto insurance policy will pay out and when. There are two types of states–fault and no-fault states–which largely dictate this, and the exclusions and coverage provided on policies in these states can be complex, but as a general overview, here’s how auto insurance policies typically handle medical expenses.

1. Your own injuries if you are involved in a one-car accident, someone else hits you, or you hit someone else.

Too often people think their bodily injury liability will pay for their own injuries and often find out that’s not the case at a very inconvenient time. Any injuries that you get in your car, regardless of who is at fault, can be covered under your Medical Payments (Med Pay or MP), or your Personal Injury Protection (PIP). The state you live in will determine which one is available to you and the limits you can request.

If you don’t have health insurance, you should definitely include this coverage, and even if you have health insurance, remember that most health insurers won’t even pay for medical expenses stemming from a car accident.

If someone else is responsible for your injury, you can also claim on their insurance and you will have up to the per-person liability limit depending on how many people they injured.

2. Other passenger’s injuries.

If you cause an accident and you have passengers in your car, your MP coverage will cover them, too. If you or a passenger is hurt by slamming your hand in the door or falling getting in or out of the car, that is also covered under MP. You do not have to cause an accident for injuries to be covered under your policy.

3. Other driver’s injuries.

If you cause an accident and you hit another vehicle with people in it, your liability limits are what will pay out for their expenses. One thing to note–in most cases, you have the ability to have MUCH more liability coverage than MP coverage. This is because when you cause an accident, you’re held liable, which means you can be sued for any expenses incurred by the accident. Insurers set policies up this way not to inconvenience you if you’re injured, but rather so you’re protected from being sued if you cause a major accident. That’s why you may only be able to choose $10K in medical payments coverage for yourself versus $500K in bodily injury liability. Odds are you’re going to face larger financial loss from someone else suing you for injuries versus medical expenses you may incur since a lawsuit is going to include pain and suffering, loss of wages, and other incidental expenses caused from an accident you’re liable for. Of course, a lot of this depends on the state you live in as well, so keep that in mind.

The cost of medical expenses, rehabilitation, lost wages, and other losses will often be much greater than a situation where your passenger accidentally injures himself too.

If you don’t have MP or you have the minimum liability allowed, you may be pleasantly surprised at how little it costs to add or increase those coverage options. If you don’t have medical payments coverage or if you carry state minimum bodily injury liability limits, you could be placing yourself in a situation where a vehicle won’t be the only thing wrecked—so will your credit and possibly your finances.

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