When you’re seriously injured in an auto accident, medical treatment is central to your recovery. You may need emergency procedures, surgery, and inpatient care. While you don’t want to think about the costs, you need to pay for the procedures that allow you to heal.

That’s what makes Personal Injury Protection (PIP) coverage so important. It pays for your treatment so you won’t have to worry about paying your medical bills when they arrive.

PIP Coverage Is No-Fault Coverage

The no-fault aspect is one of the most important Personal Injury Protection coverage features. Your insurance company pays auto accident-related medical bills and lost income benefits without considering who caused the car accident. Each injured driver or passenger reports a claim to their own auto insurance carrier. The insurer pays benefits that would have previously required the injured person to demand reimbursement from a negligent party. PIP pays even if you caused the accident.

PIP Claims versus Tort Liability Claims

To understand the difference PIP coverage has made for people injured in auto accidents, you should understand the prior tort system. Tort is a legal term for a negligent act or a civil wrong that one individual or entity commits against another. When one driver causes injury by crashing into another, their action is a tort. When a person caused harm, no matter how small the injury, the injured person usually had a right to file a lawsuit against them to recover their damages.

Even People With Minor Injuries Filed Lawsuits

Under the previous tort system, injured people had limited options. Even if they had health insurance to pay their medical bills, they had no other resources to make up for lost wages and other costs. They presented a claim to the other driver’s liability insurance carrier and waited for them to make a decision.

If the responsible party didn’t have insurance or their insurer denied liability, the injured person filed a lawsuit—even if they had only minor injuries. If their lawsuit was successful, their judgment may have included money for medical bills, lost wages, and non-economic damages such as pain and suffering.

Lawsuits Were Never Simple

Injured people may have eventually recovered the damages to which the law entitled them, but the lawsuit process wasn’t simple or easy. When one person sued someone for damages, the other person might have filed a countersuit. Because of ongoing depositions, discovery requests, and hearings, lawsuits turned even simple injury claims into extended legal confrontations. The process kept multiple parties tied up in litigation, often for years.

The Previous Tort System Wasn’t the Right Solution for Everyone

The tort system can clog the courts with minor and major injury cases. Civil court dockets backed up. Insurers paid high legal fees to defend claims that perhaps they should have paid in the first place. Sometimes insurers settled lawsuits so they could close out their reserves and move on to the next case.

No-fault changed this—in theory—by giving injured people a way to collect damages without resorting to litigation. PIP doesn’t provide large sums of money, but the benefits help injured people when they need it most.

PIP Advantages

The state legislature designed PIP benefits to provide easy, consistent access to benefits for injured insured parties.

Under a basic policy, a person with minor injuries could avoid resorting to a liability claim or filing a lawsuit.

• No-fault statutes mean an injured insured doesn’t have to file a suit against another party and prove negligence to recover medical bills, lost income, and expenses for minor injuries.

• Insurance premiums are lower because PIP statutes limit liability claims and lawsuits, and insurers save litigation and claim costs.

• Policyholders have a choice between affordability and comprehensive coverage.

Personal Injury Protection Policy Options

The New Jersey PIP statute, for example, offers policy options that allow an insured to control their benefits and premiums. Insurers must make three auto policy options available: Standard, Basic, and Special. Consider your coverage options carefully. The policy option you select affects your right to pursue liability damages when you sustain injuries in an accident during your policy period.

Standard auto insurance policy: The New Jersey Department of Banking and Insurance suggests that many New Jersey residents prefer standard insurance policy coverages over basic. The standard policy provides a PIP coverage limit as low as $15,000 per person or accident. You may purchase a limit of up to $250,000 per person or accident. The standard policy also gives you the right to designate a “Right to Sue” option.

This determines your damage recovery options when you sustain injuries in an accident.

• Unlimited right to sue: Even if you sustain only minor injuries, the unlimited right to sue option allows you to sue a negligent driver immediately when your PIP benefit limits, deductibles, and co-pays leave you with unpaid bills and expenses. You’ll have no injury threshold or litigation waiting period. You may sue the negligent party at any time after the accident up until the statute of limitations expires.

• Limited right to sue: When you choose this option, your injuries determine your right to seek damages from a negligent driver. You may file a suit only if your injuries meet a statutory threshold: loss of a body part, significant disfigurement, significant scarring, a displaced fracture, loss of a fetus, a permanent injury, or death.

Basic auto insurance policy: The Basic policy provides a $15,000 per person or accident limit. The policy automatically includes the Limited Right to Sue option, which you cannot change.

Special auto insurance policy: The Special Policy is a no-frills coverage option for vehicle owners who qualify for Federal Medicaid With Hospitalization. The policy does not provide traditional PIP benefits. It pays only for emergency medical treatment immediately after an accident. It also pays a $10,000 death benefit. Qualified drivers can purchase a Special Auto Insurance Policy for an economical $365 annual premium.

Catastrophic injury benefit: Regardless of the coverage option you choose, every New Jersey Personal Auto policy includes a statutory $250,000 catastrophic injury benefit in addition to your stated coverage limit. It pays only for medically necessary treatment for an auto accident-related brain injury or spinal cord injury. It pays only for immediate care at a trauma center or an acute care hospital. Basic and Standard policies also provide medically necessary emergency benefits under this coverage for disfiguring injuries.

N.J.S.A. 39:6A-3.1 explains that insurance companies have a right to reimbursement for any Catastrophic Injury benefits paid in excess of $75,000 for a single injured person’s medical expenses. They have the same payment reimbursement right for Personal Injury Protection Medical benefits paid in excess of $75,000. Insurers can recover any excess payment amounts from the New Jersey Unsatisfied Claim and Judgment Fund.

Available PIP Benefits

New Jersey provides flexible insurance policies. You can make choices based on what’s most important for you at the time you purchase your policy. When you choose either a Basic or a Standard plan, you also determine your available PIP benefits.

1. Medical expense benefits: This benefit pays for the “reasonable, necessary, and appropriate treatment” you require when you’re injured in an auto accident. The PIP statute excludes certain diagnostic tests and non-traditional treatments such as acupuncture. Your policy benefits may be subject to co-payments, the percentage you pay toward each bill for medical service you receive.

Your PIP coverage may also include a deductible. You may select a higher deductible if you prefer a lower premium. High deductibles also increase your overall contribution to your medical bills. Both Standard and Basic policies provide PIP medical benefits coverage. The policy you choose determines your maximum benefit amount.

1. Income continuation: Only Standard policies provide benefits for lost wages. You may receive up to $100 per week with a maximum limit of $5,200. Your insurer reduces your income benefit if you receive temporary disability benefits from another resource.

2. Essential services: This coverage is also available only on the Standard Auto Policy. It pays up to $12 per day when an insured must hire someone to perform cleaning, yard work, and other household tasks. The maximum Essential Services benefit is $4,380 per any individual insured.

3. Death benefit: Family members or the decedent’s estate receive a benefit based on unpaid income continuation and unpaid essential services benefits after an insured’s death. This coverage is a Standard Policy benefit.

4. Funeral expense: The Standard Policy pays up to $1,000 toward funeral expenses.

You May Select Your Health Insurance as Your Primary Auto-Injury Coverage

In New Jersey, you have another coverage option that doesn’t involve your auto insurance. Instead of using your PIP coverage, you can select your health insurance as your primary medical coverage.

This option will reduce your auto insurance premium, but you must make sure that it’s the right choice for you and your family.

• Make sure that your health insurance carrier provides coverage for auto accident injuries.

• Determine if your health policy has subrogation rights. If it does, your health insurer has the right to seek reimbursement from the responsible party for any benefits they pay. If you file a lawsuit, they will require you to protect their legal interests. If you recover a lower amount than anticipated, your health insurer may seek a larger share of the settlement.

• You must make sure that you will still have health insurance if you have an accident. If your employer provides coverage, you must be certain that you aren’t at risk for layoffs or cutbacks.

• Make sure you can afford your health insurer’s deductibles or copayments. If you sustain a serious or catastrophic injury, you may need to shoulder hefty out-of-pocket payments.

You may choose a healthcare insurance coverage option as part of your coverage selection process when you purchase your policy. If you lose your healthcare coverage and you’re injured in an accident, your auto insurer must provide PIP benefits. They will reduce your payment by an additional $750 deductible in addition to any existing deductible.

You Must Consider Your Insurance Choices Carefully

Before you make PIP auto insurance decisions, consult with an agent or broker you trust. The choices you make may not seem significant until some time in the future when an accident injures you. PIP is just one aspect of your policy. You must also make decisions about liability coverage and coverage limits. Your insurer will also offer you Uninsured and Underinsured Motorists coverages.

If you determine that you made the wrong insurance choice after you’re injured, you may have no recourse against an insurance agent or broker. New Jersey typically sides with insurance companies in resolving coverage omissions and coverage disputes. Except for a “willful, wanton or grossly negligent act,” N.J.S.A 17:28-1.9 grants insurance companies immunity when their insured makes the wrong coverage choices.