Not all car insurance policies cover lost wages after an accident — and that’s where a work loss exclusion comes in.
If your Personal Injury Protection (PIP) policy includes a work loss exclusion, it means your insurer won’t pay for lost income if you’re injured and unable to work. That could leave a significant financial gap if you rely on your paycheck to cover daily expenses.
In this guide, we’ll break down what work loss exclusion means, when it applies and how to decide whether it’s the right choice for your car insurance coverage.
CarInsurance.com Insights
- Exclusion of work loss (included) means that the car insurance policy you purchase has excluded coverage for lost wages.
- The main reason to exclude coverage for work loss is to lower your rates.
- In general, most people shouldn’t choose the loss wage exclusion.
What does the exclusion of work loss mean for car insurance?
An auto policy that says “exclusion of work loss (included)” in the policy means that the car insurance policy that you have or are purchasing has excluded coverage for lost wages.
Typically, this exclusion is under the personal injury protection (PIP) portion of a policy.
For example, in Florida, you are required to have $10,000 of PIP and part of the benefits that come with PIP coverage is a percentage of your lost wages (income). A typical Florida PIP policy pays 80% of medically necessary expenses, 60% of lost wages, 100% of replacement services and $5,000 for death benefits.
You can amend or extend your PIP to increase medical expenses to 100% and lost wages to 80% or increase your minimum limits from $10,000 to $20,000 or more. You can also exclude some coverages and choose a deductible amount for PIP to reduce the cost of your PIP coverage.
Your car insurance application may give you an option under the personal injury protection insurance coverage in which the named insured may elect a deductible and to exclude coverage for loss of gross income and loss of earning capacity (lost wages).
These elections apply to the named insured or named insured and all dependent resident relatives. If you choose these options, you’ll pay less for that portion of your car insurance. But you won’t have coverage for lost wages after an incident.
What does it cover?
When work loss coverage is included in a PIP policy, it may compensate you for lost wages or a portion of your lost wages after an accident.
What does it exclude?
If work loss coverage is excluded from a PIP policy, the insurer won’t compensate you for any lost wages after an accident.
Should you exclude work loss coverage from your PIP?
In general, most people shouldn’t choose the loss wage exclusion. If you are in a serious accident and can’t work for a while, excluding lost wages from your PIP coverage could put you in a challenging financial situation.
Rather than dropping coverage, compare car insurance quotes in your state and find the best rates.
When it makes sense to exclude
Excluding work loss coverage can be the right move in certain situations. Here’s when it might make sense to exclude this coverage:
- You’ve retired from paid work
- You aren’t employed
- You only receive passive income
“Skipping work loss coverage may be OK if you’re comfortable that you won’t be in danger of missing out on income if you’re injured, such as if you have robust disability insurance or significant savings,” says Seann Malloy, founder and managing partner at Malloy Law Offices.
“For instance, people who are working from home in relatively secure, nonphysical jobs or who have a robust financial cushion may not require it.”
When should you keep coverage?
Paying for work loss coverage makes sense when you get paid to work. Here’s when it often makes sense to keep work loss coverage:
- You are self-employed.
- You have a high income.
- You don’t have a disability insurance policy.
If you need the income from your day job to pay for your lifestyle, then it often makes sense to purchase work-loss coverage.
Check your state rules
Every state has different insurance rules. Below is a look at the states that require PIP coverage.
- Delaware
- Florida
- Hawaii
- Kansas
- Massachusetts
- Michigan
- Minnesota
- New Jersey
- New York
- North Dakota
- Oregon
- Utah
Since the rules vary from state to state, it’s essential to check into the details of coverage requirements for your state. Even if your state doesn’t require PIP coverage, you might be able to purchase a policy to protect your financial situation better.
People like you also ask
“We’re both retired. Our income is from Social Security and investments. Should we still pay for work loss coverage?”
“Retirees generally do not require work loss coverage because they are not working for wages,” Malloy says. “Dropping this may be a way to save money, but make sure it doesn’t exclude medical coverage, and ask your insurer.”
“We have a $10,000 PIP policy with a $1,000 deductible. Work loss exclusion is checked — what does this mean for us?”
With a $10,000 PIP policy, the insurer will pay a maximum of $10,000 in medical costs during a claim after you pay your $1,000 deductible. Since work loss exclusion is included, you won’t be compensated for lost wages relating to the accident.
How work loss exclusions apply to resident relatives
When your PIP policy excludes work loss coverage, that applies to the named insured and resident relatives in your household. For example, excluding work loss coverage on a shared policy means that neither you, your spouse or any other relative living in the house would receive lost wage compensation after an accident.
What is work loss coordination coverage?
Work loss coordination means that if you have work loss coverage in your PIP policy and qualify for workers’ compensation coverage, the insurer can take credit for the other insurance company’s payout. This only applies to New York drivers.
For example, let’s say the work loss component of your PIP policy allows up to $2,000 per month in compensation. But you are already receiving $1,500 from a workers’ compensation policy. With that, the PIP policy may only require to pay you $500 per month.
What is a no-entitlement exclusion?
A no-entitlement exclusion means that an insurance company won’t honor the coverage during a loss if the person driving the vehicle didn’t have reasonable entitlement to drive the vehicle. For example, if someone steals your vehicle and gets into an accident, the insurer won’t cover any claims made by the thief.
The bottom line: Understand when a work loss exclusion makes sense
Excluding work loss coverage can lower your car insurance costs. But for some, driving without this coverage could lead to a financially tight spot after an accident.
If you depend on your income, paying for work loss coverage could make sense. If you don’t depend on an active income, excluding work loss coverage could make sense. Weigh out all of your options before moving forward.
Resources & Methodology
Sources
- Kentucky Law Journal. “The Entitlement Exclusion in the Personal Auto Policy: The Road to Reducing Litigation in Permissive Use Cases or a Dead End?” Accessed July 2025.
- New York Department of Financial Services. “OGC Opinion No. 03-04-24.” Accessed July 2025.
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