PIP, MP and UM – Business Auto Policy
What is the difference between Personal Injury Protection and Medical Payments insurance coverage? If I have workers’ compensation insurance, why do I need either? How about Uninsured Motorists coverage? These are great questions that our customers ask frequently.
You understand the need for auto liability and physical damage insurance. Liability coverage protects you and your firm from the legal and financial consequences resulting from accidents involving vehicles owned or used by your business. Physical damage coverage protects your investment in vehicles owned by the business should they be damaged by fire, theft, collision or other causes of loss.
You may have questions, however, about the need for medical payments, personal injury protection, or uninsured motorists coverages. The cost of these coverages is a significant expense to your business, so you need to understand the benefits and limitations of the coverages before you make a decision whether to buy or reject them.
- Medical payments coverage pays the reasonable expenses an insured person incurs for medical and funeral services within three years of an accident.
- Personal injury protection coverage, in addition to medical and funeral expenses, pays 80 percent of an insured person’s loss of income. If the injured person is not employed, the coverage pays reasonable expenses for obtaining family or household services the insured person normally would have performed.
- Uninsured motorists coverage entitles an insured person to recover legal damages for bodily injury or property damage caused by either an uninsured vehicle or a vehicle that has a liability limit inadequate to cover the person’s damages. Negligence on the part of the owner or operator of the uninsured or underinsured motor vehicle is a prerequisite for this coverage.
All three coverages contain special definitions that determine who is an insured person and thus eligible to receive the benefits described above. “Covered auto” as used here typically means only vehicles scheduled on the policy for one of these coverages. A separate premium is required for each vehicle and for each coverage.
- When an individual is named on the face of the policy (or in an endorsement to the policy) as the named insured, that individual and any family member of that individual can receive the benefits if they are injured while occupying a covered auto or when struck by another vehicle as a pedestrian.
- Anyone else can receive the benefits if they are injured while occupying a covered auto.
When the insured named on the face of the policy (or in an endorsement to the policy) is a corporation or partnership, coverage applies only to an individual who is injured while occupying a covered auto.
However, uninsured motorists or medical payments coverage for specific individuals can be purchased to provide benefits to those individuals if they are injured while using or occupying a vehicle that is not scheduled on the policy or owned by that individual. If you or certain employees need or want this extra protection, ask your insurance agent for details on its availability and cost.
Coverage for Employees
Coverage for employees injured on the job is different on each of the three coverages.
- Medical payments coverage will not pay benefits to an employee who is injured on the job. An employee can collect medical payments benefits only if injured while occupying a covered auto while off-duty.
- Personal injury protection benefits are payable regardless of employment status and in addition to the employee’s workers’ compensation benefits (if any apply).
- Uninsured motorist coverage applies to a covered person regardless of employment status, but only for amounts that can be recovered in excess of or in addition to benefits provided by any workers’ compensation coverage.
Coverages Must Be Rejected in Writing
State law requires your agent or insurance company to offer personal injury protection and uninsured motorist coverages and provide the coverages on all vehicles you own, unless you reject the coverage in writing. You can reject either of these coverages on behalf of everyone the policy covers, including employees.
Nothing in the law prevents you from rejecting coverage on selected autos and accepting coverage on others, so for example you can cover private passenger autos and reject coverage on commercial autos or select uninsured motorists property damage coverage only on commercial autos without collision coverage.
Because of the limitations and conditions in these coverage, you should carefully consider whether you need high limits or whether you need to carry these coverages at all.
Most businesses do not need to purchase these coverages on trucks that are used only on company business. The need for one or more of these coverages on your auto policy may be limited to the following circumstances:
- You are individually named on the face of the policy (or in an endorsement to the policy) and the policy covers vehicles individually owned by you and used by your family.
- You have elected not to purchase workers’ compensation insurance. In this case, the personal injury protection or uninsured motorists coverages can provide limited benefits to employees injured in auto accidents while they are operating or occupying a covered vehicle on the job.
- Employees are permitted to use company vehicles for non-business purposes and you want to provide the coverage for the benefit of the employees and their families.
- Non-employees, such as clients, are likely to be passengers in your vehicles, and you want the additional coverage to be available as a gesture of goodwill or to prevent a lawsuit should they be injured while riding in one of your vehicles.
- You don’t carry collision insurance on some vehicles, or transportation insurance on cargo carried by those vehicles. In that case, you may want to consider uninsured motorists property damage coverage only.
Be sure to discuss these coverages with your insurance agent after considering your specific circumstances, and make a decision regarding these coverages that is appropriate for your business operations and your insurance budget.