What is a Massachusetts Personal Injury Protection (PIP) Deductible, and why are they a Bad Idea?

Massachusetts Personal Injury Protection (PIP) is no fault insurance coverage available through your own insurance policy or the policy of a household member related by blood or marriage. Unsavvy consumers often waive this coverage in an effort to save money on their premium. Why is this a bad idea?

What is Personal Injury Protection (PIP) Coverage?

Let's begin with a brief explanation of what Personal Injury Protection (PIP) coverage is. Under M.G.L. c90 Section 34M, every automobile insurance policy written in Massachusetts shall provide for up to $8,000 in Personal Injury Protection (PIP) coverage, regardless of fault, to all occupants of a vehicle involved in a motor vehicle accident, as well as to any pedestrian struck by an automobile. This Personal Injury Protection (PIP) provides coverage for reasonable and necessary medical and/or funeral expenses as long as causally related to the accident; lost wages at a rate of 75%; and certain replacement services (e.g., payment to non-family members to perform services that the injured vehicle occupant would otherwise have performed themselves). There are certain limitations to this coverage (e.g., one who has private health insurance obtains only $2,000 in up front coverage for medical bills and thereafter needs to coordinate coverage for their remaining medical bills between PIP and their private health insurance carrier), but despite these minor limitations PIP remains a very useful and important insurance coverage to those injured in a motor vehicle accident. Unfortunately M.G.L. c90 Section 34M also allows for this very important benefit to be waived, in part or in full, for the insured and/or household members by electing a partial or complete PIP deductible.

What is a Personal Injury Protection (PIP) Deductible?

M.G.L. c90 Section 34M reads, in part, that every motor vehicle insurance policy in the commonwealth "shall provide personal injury protection benefits … except to the extent such defined benefits to an insured or obligor or members of an insured's or obligor's household may be modified, reduced or eliminated by [electing a] deductible authorized by this section". This statute goes on to explain that '[e]ach insurer providing personal injury protection shall issue to any person purchasing a motor vehicle liability policy or bond, at his option, a policy endorsement … which shall provide that there shall be deducted from amounts that would otherwise be or become due to the policyholder alone or to the policy holder and members of his household, as the policyholder elects, an amount of either one hundred dollars, two hundred and fifty dollars, five hundred dollars, one thousand dollars, two thousand dollars, four thousand dollars or eight thousand dollars, again as the policyholder elects, said amount to be deducted from amounts otherwise due each person subject to the definition". So, as you can see, it allows a policyholder to elect a deductible up to the full $8,000 in otherwise available personal injury protection (PIP) coverage.

If that's not bad enough, the statute further states that "any person electing such an endorsement or subject to such an endorsement as a result of the policyholder's election shall have no right to claim or to recover any amount so deducted from any owner, registrant, operator or occupant of a motor vehicle or any person or organization legally responsible for any such owner's, registrant's, operator's or occupant's acts or omissions who is made exempt from tort liability by this section". What does this mean? - It means that not only have you waived the right to collect this valuable personal injury protection (PIP) coverage under your own policy, or that of a household member, but you have also let anyone at fault for the accident, and their insurer, off the hook for the payment or coverage of these damages as well. In other words, not only have you waived up to $8,000 in coverage under your own policy, or that of a household member, but you have also reduced the value of any third party claim you may have against whoever was at fault for the accident by that amount as well (i.e., the at fault party, or their insurer, can reduce the amount of compensation they owe you by deducting the amount of PIP benefits you would have received had you not elected a deductible).

So although electing a PIP deductible may seem attractive when initially purchasing an automobile insurance policy, as it will slightly reduce the annual premium, I can assure you that the selection of a PIP deductible will be something the policyholder will seriously regret having done if they, or a household member, are ever injured in an automobile accident. Any slight decrease in the overall yearly insurance premium by electing a PIP deductible will be negligible compared to the amounts lost if an unfortunate motor vehicle accident should occur during the policy period.

Beware of Online Insurers Promising to Save you Money on your Automobile Insurance

I'm going to use this opportunity to share a warning about certain tactics being employed by various online insurance providers, as they relate to personal injury protection (PIP) deductibles. Don't fall prey to this common trap. Overall, insurance rates are fairly similar from one insurance company to the next. Often times the way they are actually "saving you money" is by effectively convincing you (I like to use the phrase "tricking you") to purchase less than satisfactory coverage with, yes you guessed it, large deductibles (including PIP deductibles). That's why I always advise my clients not to purchase their insurance online, but instead to actually sit down with a local insurance agent who can explain what exactly they are giving up for a reduced premium. If I had a dime for every client with a PIP deductible who told me they weren't aware that they had one, or that they didn't understand what it was when they purchased their policy, I would be a very wealthy man. It's a problem that has been getting worse since online insurers started preying on innocent consumers in the commonwealth in recent years. The ever attractive offer to "save you money on your auto insurance". I only hope that this article will save a few people out there from falling prey to this misleading promise made by many of the more common online insurance providers, and prevent them from waiving valuable personable injury protection (PIP) coverage by inadvertently or unknowingly electing a PIP deductible.