Why is it a good idea to have medical payment insurance on your auto policy?

When you’ve been in a car accident, particularly if it was anything other than minor, you may find yourself experiencing an expensive ambulance trip followed by an expensive emergency room visit. If you don’t have health insurance, these bills can throw you for a loop. Even if you do have health insurance, your insurance may not cover anything until you have met your deductible, which can mean that you have to spend thousands of your own dollars on medical bills before your health insurance pays for anything. Many health insurance policies also cover only a percentage of some medical bills, so auto med pay coverage can really help.

An ambulance trip alone can cost more than $1,000.00, and an emergency room visit can cost much more – especially if the doctor orders any diagnostic studies such as MRIs or CT scans. The hospital will bill for the emergency room. The emergency room doctor usually has a separate bill, and the radiologist who looks at your x-rays or MRIs has yet another bill.

Auto med pay coverage will allow you to be sure that these bills will get paid if you don’t have health insurance or if your health insurance, for any reason, doesn’t cover or pay them. This can protect your good credit as well as your peace of mind.

But what if the accident wasn’t your fault and you are going to look to the other party (or the other party’s insurance) to pay your bills? First, there’s no guarantee that the other party has insurance, even though the law requires it. Second, even if the other party has insurance, his or her insurance company generally will not pay your bills unless and until you settle your entire bodily injury claim with them. In most cases, you won’t want to settle right away because you may need more medical treatment and you may not yet know how serious your injuries are, how much work you’ll have to miss or how long it will take you to get better.

If you were hurt and you make a bodily injury claim against the person who hurt you, your auto med pay coverage can benefit you even more. Under almost every auto med pay policy available in California, when an automobile insurer makes payments under medical payment coverage, it is “reimbursable,” meaning that if you make a bodily injury claim against a person who hurts you and you received money on that claim, you have to pay back what your insurer paid you in medical payments benefits. That is because, if you did it right, you collected your medical bills as a part of your bodily injury claim. (This is where I tell you that it is always a good idea to talk to a knowledgeable and experienced personal injury attorney before you talk to the other side when you’ve been hurt in an accident.) When you’ve hired an attorney on a contingent fee basis, however, you don’t have to pay back all of the medical payments benefits your carrier paid, which means you will get to keep more money from your claim. Your auto med pay carrier must reduce its reimbursement by whatever percentage you paid your attorney. This is so that you don’t wind up paying attorneys’ fees to recover money for your insurer. It sounds confusing, but here’s how the math would work (the numbers below are hypothetical and aren’t meant to represent the value or results of a particular case):

SCENARIO 1 (you don’t have med pay coverage, you hired an attorney for 35% contingent fee, you have $4,000.00 in bills you have to pay out-of-pocket.)

Settlement: $10,000.00
Less attorneys’ fees: <$3,500.00>
NET: $6,500.00
Less medical bills you have to pay: <$4,000.00>
NET TO YOU: $2,500.00

SCENARIO 2 (you have med pay coverage, hired an attorney for 35% contingent fee, med pay pays $4,000 in benefits.)

Settlement: $10,000.00
Less attorneys’ fees: <$3,500.00>
NET: $6,500.00
Less medical bills: <$4,000.00>
NET: $2,500.00
Plus auto med pay benefits
paid by your insurer: $4,000.00
NET: $6,500.00
Less your auto med pay
repayment ($4,000 less 35%): $2,600.00
NET TO YOU: $3,900.00

You netted an additional $1,400.00 because you had auto med pay coverage.

Of course, if you didn’t bring a bodily injury claim either because the accident was your fault or you just chose not to do so, you do not have to pay your insurer back anything at all and you have protected yourself from the out-of-pocket bills you otherwise would have had to pay.

The bottom line is that auto med pay coverage can offer you important additional protection, and the additional premium is generally not that high. I don’t sell insurance. In fact, I make my living trying to recover damages for my clients from insurance companies who aren’t particularly eager to pay. Still, auto med pay can be very useful. Along with uninsured motorist coverage (which is another subject I will address) it offers protection you should not do without if you’re driving a car.

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