Final answer:
Personal Injury Protection (PIP) covers medical expenses for the policyholder and passengers after a car crash, regardless of who is at-fault. It can aid with hospital bills, rehabilitation, and lost wages. Deductibles, copayments, and coinsurance are cost-sharing mechanisms in insurance policies.
Step-by-step explanation:
Personal Injury Protection (PIP) coverage is a type of car insurance that helps pay for certain medical expenses for the policyholder and often for passengers, regardless of who is at fault in the event of a crash. This can include hospital bills, rehabilitation costs, and sometimes lost wages due to the inability to work following an accident. It is an important component of an auto insurance policy because it provides financial aid during a time of need. An additional aspect to consider with PIP, and insurance in general, is the presence of deductibles, copayments, and coinsurance, which are methods to reduce moral hazard by making sure the insured party shares in the cost to some extent.