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Medical payments coverage

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Medical payments coverage, or MedPay, is typically a supplemental component of a standard auto insurance policy that covers injuries that you or your passengers sustain in a car accident. MedPay covers you no matter who caused the crash. It also covers you if you are injured while riding in someone else’s car or if you are injured by a motor vehicle while on foot, riding a bicycle or using public transportation such as a bus or train.

When searching for ways to lower your car insurance premium, you may be tempted to remove medical payments coverage from your policy. After all, it may not be required in your state, but this often-misunderstood optional coverage might be helpful to you when you need it the most. It can be used to supplement existing health insurance coverage.

What is medical payments coverage?

In a nutshell, medical payments coverage pays medical bills up to your coverage limit for you and any passengers riding in your vehicle in case of an accident, regardless of who is at fault. Your medical payments coverage moves with you (walking, riding with a friend or on public transportation, in-state or out), as well as with your insured vehicles, regardless of who is driving. It carries no deductible or copay.

You might think your bodily injury liability coverage will cover those expenses, but that coverage only steps in to cover injuries of parties in another vehicle from an at-fault accident. It does not cover you. While another driver’s bodily injury liability coverage can help if you are injured in an accident that another insured driver caused, it may take months for their car insurance company to pay your medical bills. Your health insurance might pay, but many health care plans have high deductibles and copays that can stretch finances to the breaking point before the insurance settlement with the at-fault driver is reached.

With MedPay, you can get immediate coverage to help pay any medical bills you or your passengers face after an accident. Plus, your medical payments coverage can protect you if you get hit by a car while you are on foot or a passenger in another vehicle, too.

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How does MedPay work on auto insurance?

The beauty of MedPay is that it generally kicks in quickly to pay your medical bills, health insurance deductible and copays, up to the policy limits. It also covers other out-of-pocket costs that your health policy might not pay, including ambulance fees, chiropractic, dental, prosthetics and, in a worst-case scenario, funeral expenses.

Unlike liability coverage, MedPay policy limits do not refer to the total available coverage limit, but instead to the amount available for each covered injured individual. For example, if you have a $5,000 MedPay limit and you, your spouse and your two children are injured in an auto accident, each of you could collect up to $5,000 in MedPay coverage for a total of $20,000. However, your insurer will not pay the same bills under both your MedPay and liability coverage.

Medical payments coverage can be especially important for drivers without health care insurance. However, MedPay should not be used as a substitute for health coverage. You must carry auto liability coverage in order to purchase MedPay, and you have to be injured in an auto-related accident to use it.

What does MedPay cover?

If you are considering purchasing medical payments coverage, you are probably wondering what protections you will get. Here are some of the coverages that MedPay provides:

  • Medical care: Your MedPay can cover the cost of doctors and hospital expenses.
  • Health care insurance deductibles and co-pays: A huge benefit of medical payments coverage is that it can allow you to use your existing health insurance coverage with no out-of-pocket cost. MedPay might cover any co-pays for your doctor visits, plus your health care insurance deductible, up to the policy limit.
  • Emergency medical care: MedPay does not just step in for checkups after the accident. It can cover the cost of an ambulance trip or emergency medical services, which are often pricey but critical if you or any of your passengers are badly hurt in the accident.
  • Specific diagnostics and treatments: Medical payments coverage also covers services to help you determine the extent of your injuries, like X-rays, or treatments required for you to heal, like surgery and therapy.

Medical payments coverage can go a long way to financially help you or your passengers if any of you gets hurt in a car accident.

How is MedPay different from PIP

If you live in one of the 12 “no-fault” states (Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania and Utah), the benefits of MedPay may sound familiar. That is because MedPay coverage is very similar to personal injury protection (PIP) coverage. PIP coverage is generally mandatory in no-fault states.

PIP coverage works similarly to MedPay, paying for medical expenses after an auto accident. But PIP coverage is generally further reaching than MedPay, covering things like wage reimbursement if you have to miss work because of your injuries.

How much does medical payments coverage cost?

The premium for MedPay is generally quite low and the benefits you may receive from just one claim may be worth the financial peace of mind.

“For example, if your health insurance has a $1,000 deductible, a 20% copay and you have a $5,000 medical claim from an accident, with your health insurance you would typically pay $1,800 out of pocket,” says Christy Moulton Perry, director of product management for Great Northwest Insurance Co. “But with your MedPay, you would pay $0 out of pocket. That’s a big difference.”

Despite the compelling arguments in favor of MedPay, nearly one in four State Farm drivers chooses to decline it in states where it is offered, according to company spokesman Kip Diggs. Those who choose to forgo the coverage can either afford to self-insure for the cost of items covered under MedPay or are willing to take on the risk of possible out-of-pocket medical expenses in the event of an accident.

But Perry says a smarter move for many would be to boost coverage from the standard levels of $1,000 to $5,000 up to $10,000 or more. The cost to move from $2,000 to $10,000 in MedPay on a Travelers auto policy is around $10 per year, according to agent Shawn Wainwright of Brown & Brown Insurance in Florida.

“Going up to $50,000 or even $100,000 usually costs very, very little and can be worth it,” Perry says. “I know one case where the driver only had $5,000 (MedPay) and had a serious accident in which she was disabled for a long time. A year-and-a-half after her accident, her credit had been ruined because she had all of the hospital bills she couldn’t pay. Even though the other car insurance company acknowledged liability, she had to wait for the entire claim to be closed before she could get that recovery.”

Frequently asked questions

What is the difference between bodily injury and medical payments?

The bodily injury liability portion of your auto insurance only pays for medical bills if you cause an accident. In that case, it steps in to cover the resulting medical expenses for the other driver and their passengers. It does not cover your own medical bills, though, or those of your passengers. For that protection, you will need to look at medical payments coverage (MedPay) or personal injury protection (PIP), depending on your state.

Do you need medical coverage on car insurance?

It depends on the state in which you live. If you are a resident of one of the 12 no-fault states, you will likely be legally required to carry PIP coverage. State laws vary, and some may require MedPay. But in other states, MedPay is optional. However, the low cost of MedPay makes it an attractive addition to your existing auto insurance policy.

How much MedPay coverage should I have?

The amount of MedPay coverage you should consider carrying depends on your specific needs. Increasing your MedPay coverage limits usually comes with a low cost so it may make sense to carry more than you think you need. Talking to a licensed insurance agent may help you determine the proper amount of medical payments coverage for your specific needs.

Do I need MedPay if I have health insurance?

Carrying medical payments coverage even if you have health care insurance is often a good idea, especially if you have a high health insurance deductible or pricey copays. Your MedPay might be enough to cover your health insurance deductible and copays so you can use your health insurance with no out-of-pocket cost for yourself. Plus, MedPay extends to your passengers, so it is a good way to protect everyone in your vehicle. Talking to a licensed agent about your specific situation might be helpful to determine the right MedPay level for you.

Written by
Kacie Goff
Personal Finance Contributor
Kacie Goff is a personal finance and insurance writer with over seven years of experience covering personal and commercial coverage options. She writes for Bankrate, The Simple Dollar, NextAdvisor, Varo Money, Coverage, Best Credit Cards and more. She's covered a broad range of policy types — including less-talked-about coverages like wrap insurance and E&O — and she specializes in auto, homeowners and life insurance.
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