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What are first-party injury coverages and do I need them?

Auto Insurance Basics
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Now we get into the first party -- you and your passengers. Here we're talking about expenses as opposed to liability. In other words, these are things you'll want covered, even if a court of law doesn't insist that you pay for them.

When it comes to injury-related expenses, if the other party is at fault, your first line of defense will be the other guy's third-party liability coverage. Take our advice, though: Don't bank on it.

Your odds of a successful claim will depend on many things, including the opinion of others -- including, potentially, a court of law -- and whether the other guy has any insurance or assets for which you can file a claim. Even though liability insurance is required by law, many people -- including 28% of all California drivers, according to a 1995 survey -- still drive without it. Moreover, those who drive without insurance are the most likely to have few assets and little income.

Your health insurance (outside of your automobile policy) will cover some of your family's medical costs, and a good disability policy will cover a long-term loss in wages. However these policies might leave holes. Disability insurance covers only family wage-earners, and health insurance only covers your spouse and immediate dependents (not your other passengers).

Take a look at your overall insurance situation and see where your potential coverage holes may be. If you find some shortcomings, consider these additional auto policy coverages as the next line of defense:

Medical Payments (MedPay)
Covers medical and funeral costs for the driver and passengers in your car, regardless of which driver is at fault. Most commonly offered in states that do not have no-fault laws.

Personal Injury Protection (PIP)
In states with no-fault insurance laws, this coverage is often required. These states place the burden of injury coverage on your insurance policy regardless of who's at fault, so it's tough to sue the other guy. Basically, PIP just extends medical payments coverage to include lost wages. Some states allow you to waive PIP coverage for your family (assuming you already have adequate health and disability insurance), but force you to carry some PIP to cover other passengers in your car.

Uninsured and Underinsured Motorist Coverage
Welcome to the most confusing auto insurance topic of all. As the name suggests, this insurance covers you and your passengers when the at-fault driver is not properly insured or can't be located (as in a hit-and-run). Essentially, it takes the place of the phantom driver's third-party liability coverage, allowing you to make a claim against your own insurance company for injury costs (we talk about property costs elsewhere. At least this much is straightforward.

The question that often arises, though, is: Don't health, disability, MedPay, and PIP coverages already take care of these injury-related, first-party costs? Another good question is: If there are potential injury costs not covered by these other policies, aren't I taking on this risk anyway in those cases where I am at fault?

These are tough questions and, since the stakes can be huge, they are not ones that we want to answer for you. We'll just point out a few facts about un/underinsured motorist (UM) coverage and leave the final decision to you:

  • UM coverage is much broader than most health and disability insurance policies. It can compensate you for pain and suffering, loss of limb, disfigurement, and other ongoing costs that may fall outside the bounds of these other coverages.
  • Available coverage limits are usually much higher for UM than for MedPay and PIP coverage. Like MedPay and PIP, UM also covers your passengers who don't have adequate health and disability coverage of their own.
  • Since UM coverage is relatively inexpensive and can turn out to be incredibly valuable, in the right situation, many experts recommend buying it at coverage levels that match your choices for third-party bodily injury liability.
  • In some states, UM coverage is mandatory. Often, though, you can't buy more un/underinsured motorist coverage than you have in third-party bodily injury liability coverage.