Car Insurance PIP Waiver: Explained Simply

If you’re looking into saving money with different car insurance coverage options, you may have come across a PIP waiver. The PIP auto insurance definition is “personal injury protection,” and this type of policy pays for medical bills, lost wages, and more after a car accident. 

PIP car insurance is required in some states, but it is usually optional, and some drivers can choose to reject this coverage with a PIP waiver.

What is a PIP waiver, and what does it do? A PIP waiver is a legal agreement between you and the insurance company stating that you are rejecting the personal injury protection (PIP) coverage available through your insurance policy.

Is this something you should consider doing? Keep reading to learn more about PIP waivers and when you can use one to save money on auto insurance. 

What is a PIP waiver?

A PIP waiver is a written statement submitted by the policyholder waiving or refusing personal injury protection coverage on an insurance policy. A person who submits this waiver will take financial responsibility for those losses if they’re involved in an accident or collision.

Some states require PIP insurance, also known as no-fault insurance. In those states, injuries and losses are covered by your insurance company, no matter who is responsible for the accident. If your state requires PIP car insurance, you may be unable to waive the coverage without proving financial responsibility.

Why would someone waive PIP coverage?

Depending on location and policy features, PIP coverage can be costly. Waiving PIP may lower your car insurance costs. For those looking for the lowest possible price on their coverage, waiving this add-on may reduce your annual rates. 

However, waiving this coverage will increase your financial risk when driving. 

Can you use a PIP waiver in a no-fault insurance state?

Some states require no-fault insurance. In these states, it is the law that drivers maintain PIP insurance.

What are the drawbacks of waiving PIP?

If a state allows you to waive PIP, know that you are then responsible for the losses incurred in an accident. A simple accident may amount to thousands of dollars in losses you must now pay out of pocket. 

Let’s say you are in a car accident and have waived PIP. That means you cannot file a PIP claim. Your health insurance company may pay for your medical care after a car accident. However, coverage may be limited. You will still need to pay the deductible on your insurance policy, copays, and other out-of-pocket costs related to your ongoing medical needs.

Waiving PIP also opens you up to personal liability should another party sue you for their losses after an accident where you are at fault. 

What is PIP auto insurance?

According to the Insurance Information Institution, several states passed legislation in the 1970s introducing no-fault insurance. Their goal was to simplify the process of assigning fault when an accident occurs.

PIP is a type of car insurance that covers medical expenses and other losses regardless of who is at fault in a car accident. PIP typically provides a higher level of coverage than the alternative medical payments coverage (MedPay), a policy that only covers medical bills.

State auto insurance laws can be confusing when it comes to PIP coverage. In some parts of the U.S., this insurance coverage is optional. In others, it is a required policy add-on. For example, laws in 24 states allow policyholders to obtain compensation from their insurers. 

However, 12 states and Puerto Rico restrict policyholders’ right to sue insurance companies or place monetary limitations on how much someone may sue for losses such as pain and suffering. Research your state car insurance laws before you decide to waive PIP.

What does PIP insurance do?

When in place, PIP helps provide coverage for medical bills and other losses for you, your passengers, or a pedestrian after a car accident. This may include medical expenses you suffer and, in some cases, lost wages, substitute services, and funeral expenses.

Not all states require PIP. In states that do not, applying for a PIP waiver may be possible. This legally signed document attached to your car insurance policy states you take financial responsibility for losses incurred. Typically, this adds a significant amount of risk to you but lowers your car insurance rates. 

Case Studies: Understanding PIP Waivers

Case Study 1: John’s Cost-Saving Strategy

John, a driver from a state where PIP coverage is optional, decided to waive PIP in order to lower his car insurance costs. However, a few months later, he was involved in an accident that resulted in substantial medical expenses.

Without PIP coverage, John had to pay for his medical bills out of pocket, leading to significant financial strain.

Case Study 2: Sarah’s Unexpected Liability

Sarah, a driver from a no-fault insurance state, chose to waive PIP coverage without fully understanding the consequences. Unfortunately, Sarah caused an accident that resulted in severe injuries to the other party involved.

Since Sarah had waived PIP, she not only had to bear her own medical expenses but also became personally liable for the injured party’s losses. This unexpected financial burden left Sarah in a precarious situation.

Case Study 3: Mike’s Comprehensive Coverage

Mike, a responsible driver, opted to maintain PIP coverage despite the additional cost. One day, he was involved in a serious accident that left him with substantial injuries and unable to work.

Thanks to his PIP coverage, Mike’s medical bills were covered, and he received compensation for lost wages, helping him navigate the financial challenges during his recovery.

The Bottom Line on PIP Waivers 

It may sound easy enough to rely on your health insurance to cover your injuries in a car accident, and it may seem like it is financially savvy to waive PIP coverage. However, doing so exposes you to more risk. Therefore, waiving PIP is not recommended.