Is car insurance medical coverage a rip-off?

If you have health insurance, do you need personal injury protection (PIP) or medical payments car insurance coverage? Or is it just a waste of money?

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Medical payments policies cover the cost of your medical expenses after a car accident. This coverage applies to the insured driver, his or her passengers, and even pedestrians hit by the policyholder.

PIP is similar to medical payments coverage, but also covers lost wages and rehabilitation expenses.

Because PIP provides an added value it is generally more expensive than medical payments coverage. However, the price difference varies by company and state, says Kevin Lynch, an associate professor of insurance at The American College in Bryn Mawr, Pa.

Some states require drivers to purchase a minimum amount of this type of health insurance coverage. In other states, the coverage is optional.

If your state gives you a choice for coverage, you can ultimately decide if the insurance is worthwhile or a waste of money.

If your state requires this coverage, you must decide if you want to purchase the minimum amount required by law or pay for higher levels of coverage.

Redundant health insurance coverage?

If you already have health insurance, medical payments coverage and the medical coverage portion of PIP may be redundant, says Lynch.

Even so, it could still be a worthwhile purchase, because "your having health insurance is not going to benefit other people in your car if you have an accident," especially if they don't have health insurance, says Lynch. Medical payments coverage can help cover those bills.

In addition, even if you have health insurance, it may not cover all your expenses related to an accident. These costs include deductibles, dental treatments and even funeral bills. Medical payments insurance may pay for those fees.

PIP also may be redundant. Then again, PIP offers benefits beyond simple health coverage.

What if injuries from a car wreck prevent you from working? You'd want personal injury (PIP) coverage reimburse a percentage of your lost wages, says Lynch.

Short-term and long-term disability policies could help you make up for lost income, but they are taxable benefits and are usually received as less than 100 percent of your normal wages, says Lynch.

"The PIP coverage is a nontaxable payment and would help you in making up for the difference in lost wages," he says.

Lost income, even for just a few weeks, can severely impact people's finances, says Brooks Gregory, a financial adviser with Peachtree Planning in Atlanta.

For that reason, he generally suggests getting the extra insurance. If you can purchase PIP and medical coverage auto insurance inexpensively, it can help protect you in a worst-case scenario, says Gregory.

"It's not the type of coverage that someone needs to get overly excessive with, but for small health claims related to a car accident, it is a great benefit to have," he says.

Increased car insurance premium

Adding higher levels of PIP and medical payments coverage will hike the premiums on your car insurance policy. Coverage amounts typically range from $1,000 up to $10,000, says Lynch.

"Let's say you're an over 25-year-old male driving a relatively new car, and your policy for six months is going to be $600," Lynch says. "Of that $600, you're probably talking about 50 bucks of it having to go to PIP or medical payments coverage."

That $50 could typically get you about $5,000 worth of PIP coverage, or $10,000 worth of medical payments coverage, based on your driving record, says Lynch.

Such a relatively small payment could be a smart investment. According to the Insurance Institute for Highway Safety, the average loss payment for personal injury protection claims in a one-month period was $4,950 (for 2006-08 model passenger cars).

To understand what your requirements are, determine how much coverage you need and decide if state minimum requirements match your needs, it's best to speak to an insurance agent about your individual situation, Lynch says.

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