If your insurance agent or insurance company is offering to save you money on your yearly premium by suggesting you opt for a PIP deductible, CHANGE INSURANCE AGENTS AND INSURANCE COMPANIES!!!
Here’s why: If you or a loved one is in a car accident and is injured from that car accident, under normal circumstances, his or her medical bills up to $2,000.00 (if they have private health insurance, e.g. Blue Cross/Harvard Pilgrim) or up to $8,000.00 (if they have MassHealth or no private health insurance) will be paid in the first instance by what is called Personal Injury Protection (PIP) benefits from the insurance company insuring the vehicle in which you were occupying. For the purposes of this article, we will assume there are no lost wages.
I know you are asking, “why is MY insurance paying for bills when it wasn’t my fault?” Well, your insurance company pays those bills as a matter of convenience and is then reimbursed by the at-fault party’s insurance company. As a result of that requirement, the at-fault party is entitled to what is called an “offset” against the value of the case.
For example, if as a result of the car accident, you incurred $5,000.00 in medical bills and the PIP insurance company paid those bills, the at-fault party’s insurance company is entitled to a $5,000.00 offset against the value of the case. To further explain, if the case is worth $15,000.00, the offset is $5,000.00, the offer will be $10,000.00. Generally speaking, the amount after the offset is comprised of values assigned to your injuries, diagnosis, symptoms, pain and suffering, loss of enjoyment of life, loss of function and any other factor significant to you. If you settle the case for the $10,000.00, your medical bills have all been paid and after your attorney’s 1/3 ($3,333.33) and expenses, let’s assume the expenses were $166.67, you would net $6,500.00 free and clear.
If you apply the above scenario in the case where you have saved approximately four dollars ($4.00) in premiums per month because you stupidly opted for a PIP deductible, the following would occur. Your $5,000.00 in medical bills would remain unpaid. Your case would still be worth $15,000.00. Despite not being required to reimburse the PIP insurance company, the at-fault party would still be allowed to take the offset of $5,000.00. The offer would still be $10,000.00 based on the previous analysis. If you were to settle the claim under this scenario, the attorney would take $3, 500.00 comprised of the attorney fee and expenses, leaving $6,500.00. But your $5,000.00 medical bills are still outstanding. With a little luck, your attorney will negotiate the outstanding bills with your medical providers and you will receive more than $1,500.00 versus paying the full $5,000.00 in medical bills. If you aren’t lucky, you will net $1,500.00 because you were deceived into believing saving a tiny amount of the premium will be worth it.
These scenarios also apply to cases in court with a verdict In your favor. If the jury awards a verdict of $15,000.00 at trial, the judge will apply the $5,000.00 offset and the net verdict will be $10,000.00 leaving you in the same scenarios with or without the PIP deductible described in the settlement example.
Listen to me! DON’T EVER OPT FOR A PIP DEDUCTIBLE. Your case will be compromised, you will regret it and your attorney will be very upset.