SWEEPING CHANGES - IMPORTANT CHOICES
With sweeping changes to Michigan’s new auto insurance law set to begin on July 1, 2020, every Michigan motorist will be required to make critically important choices regarding how best to protect themselves and their families.
Under the new law, car crash victims no longer have guaranteed lifetime coverage for medical and rehabilitation expenses unless they specifically purchase that coverage. Moreover, all drivers will face increased liability in certain situations for the medical expenses they caused others to incur.
Every driver (and passenger) in Michigan now faces an elevated level of risk and liability. Michigan drivers now have to make potentially life-altering choices with possibly dramatic financial implications. With the stakes so high, Michigan motorists should make it a priority to educate themselves and understand their options.
The biggest change for Michigan motorists is that mandatory comprehensive lifetime no-fault personal injury protection (PIP) insurance coverage has been replaced by a tiered system that allows individuals to opt-out or purchase as little as $50,000 worth of PIP coverage for medical expenses under certain circumstances. Other options include $250,000, $500,000, and No-Limit.
The most significant decision that Michigan drivers will make is selecting a level of PIP coverage:
OPTION 1 – NO LIMIT PIP OPTION – RECOMMENDED
- This option is available to anyone purchasing No-Fault Insurance and is the closest to what we all had under the Old Law. This option covers all reasonable expenses incurred for the care, recovery, and rehabilitation of the injured person. Under this Option the new law mandates premium reductions to be “an average of 10% or greater per vehicle.” These premium reductions are not guaranteed for each policyholder. This reduction only applies to the PIP portion of your insurance premium. Other portions of your premium may actually increase. The insurance company is only required to reduce its statewide average premium charges, meaning you may not get it. Insurance companies can also apply for an exemption.
OPTION 2 – $500,000 PIP OPTION
- This option is also available to anyone purchasing No-Fault Insurance. This option only covers up to $500,000 incurred for the injured person’s care, recovery, and rehabilitation. Under this option the new law mandates premium reductions to be “an average of 20% or greater per vehicle.” These premium reductions are not guaranteed for each policyholder. This reduction only applies to the PIP portion of your insurance premium. Other portions of your premium may actually increase. The insurance company is only required to reduce its statewide average premium charges, meaning you may not get it. Insurance companies can also apply for an exemption.
OPTION 3 – $250,000 PIP OPTION
- This option is available to anyone purchasing No-Fault Insurance. This option only covers up to $250,000 incurred for the injured person’s care, recovery, and rehabilitation. Under this option the new law mandates premium reductions to be “an average of 35% or greater per vehicle.” This reduction only applies to the PIP portion of your insurance premium. Other portions of your premium may actually increase. These premium reductions are not guaranteed for each policyholder. The insurance company is only required to reduce its statewide average premium charges, meaning you may not get it. Insurance companies can also apply for an exemption.
OPTION 4 – $50,000 PIP MEDICAID OPTION (LIMITED AVAILABILITY)
- This option is only available to persons covered under Medicaid and whose spouse and household relatives are also either on Medicaid, have other health insurance, or have other PIP coverage through a different policy. Under this option the new law mandates premium reductions to be “an average of 45% or greater per vehicle.” This reduction only applies to the PIP portion of your insurance premium. Other portions of your premium may actually increase. These premium reductions are not guaranteed for each policyholder. The insurance company is only required to reduce its statewide average premium charges, meaning you may not get it. Insurance companies can also apply for an exemption.
OPTION 5 – OPT OUT (LIMITED AVAILABILITY)
- This option is only available if you and your spouse and household relatives meet certain criteria including that you and household relatives are “qualified persons” under either Medicare Parts A and B or other qualifying health insurance policies narrowly defined in the No-Fault Act. If you select this option you will also have very strict notification requirements if you or any of your household relatives ever lose qualified health coverage.
Under both the Old and New No-Fault Systems all motorists must purchase a minimum amount of bodily injury coverage. This coverage is the amount an insurance company will cover the driver and owner of a motor vehicle who is negligent and injures another person. Under the Old No-Fault System, the minimum amount all motor vehicle owners had to purchase was coverage for $20,000 because of bodily injury or death of 1 person in any 1 accident and $40,000 because of bodily injury or death of 2 or more persons in any 1 accident. These were known as 20/40 policies.
After July 1, 2020, all motor vehicle owners must purchase higher bodily injury coverage amounts. The new coverage minimum amounts are $250,000 per person and $500,000 per accident. When applying for insurance, if you want less coverage, an option will exist to reduce this coverage to $50,000 per person and $100,000 per accident. To exercise this option to reduce coverage, insurance companies will require motorists to sign a form approved by the Director of Insurance and Financial Services. This form is required because making this election for lower coverage is very financially risky, especially because drivers and owners of motor vehicles are now potentially liable for the medical bills of a person they injured.
Under the New No-Fault System all owners and drivers are potentially responsible for millions of dollars in damages they were never responsible to pay before. Because motorists are now potentially responsible for someone else’s medical expenses, they would be wise to select the highest coverage best suited to protect their assets, including their home, cars, and bank accounts.
This coverage provides protection for anyone hit by a driver without insurance—or without sufficient insurance to cover your damages. While there are no minimum amounts mandated in Michigan, most motorists would be wise to purchase as much Uninsured Motorist and Underinsured Motorist Coverage as they can afford.
Anyone who selects one of the non-Lifetime Options for no-fault coverage and is subsequently struck by someone with either no or low Bodily Injury coverage could be left with no means to pay their bills—unless they have purchased Uninsured Motorist and Underinsured Motorist Coverage (and provided that they were not more than 50% at fault for causing the crash).
It is important to note that the mandated savings for each of the coverage options above do not apply to the entire policy, but only to the PIP portion (around 45%) of the total insurance cost. For example, if you paid $2,000 for your total automobile insurance in May, 2019, under the new law, if you picked a $500,000.00 PIP policy, your savings would likely only be $180.00. Meanwhile, you and your family are now exposed to possible bankruptcy if you are involved in a crash resulting in catastrophic loss and can now be sued for the other person’s medical expenses if you cause the crash.
Also, the new law “does not prohibit an increase for any individual insurance policy premium if the increase results from applying rating factors,” so it is quite possible if your insurance company “re-rates” you or your family members, your premium will increase.
There is one final note on the “savings” supposedly built into the new law. The language of the statute very carefully states the new premiums “must result, as nearly as practicable, in an average reduction per vehicle from the premium rates for personal protection insurance coverage that were in effect for the insurer on May 1, 2019.” Essentially, the intent of the clause is to not mandate a specific savings for motorists but to provide for an average savings for everyone insured by a particular insurance company. However, expect insurance companies to simply claim it isn’t “practicable” to make the reductions. Remember, the reductions refer to the insurance company’s average, not your policy.
- A Managed Care Option is available to anyone purchasing No-Fault Insurance if offered by their insurance company. This option would impose insurance company-mandated limitations on doctor and treatment options.
- Motorists can also select a Coordination of Benefits Option, which are “deductibles and exclusions reasonably related to other health and accident coverage.” This option has always been available, but the cost-savings for coordinated policies have been altered by the changes to the No-Fault law. Under the old law this coverage was sold at “appropriately reduced premium rates” but now it is to be offered at “a reduced premium that reflects reasonably anticipated reductions in losses, expenses, or both.”
- WARNING TO MOTORCYCLE RIDERS - The new No-Fault law has changed the amount of No-Fault benefits available to a motorcyclist who has been injured in a crash with a car or truck. An injured motorcyclist’s No-Fault medical benefits are limited by whatever No-Fault coverage level exists in the auto insurance policy from which they are seeking benefits – which could be $50,000 (for drivers on Medicaid), $250,000, $500,000 or unlimited. (MCL 500.3107c(5)) This means that even if the motorcyclist has his or her own unlimited No-Fault auto insurance policy on his or her own motor vehicle, the level of No-Fault PIP medical benefits to which he or she will be entitled is limited by the coverage levels chosen by the owner or driver of the motor vehicle or motorcycle involved in the crash.
- WARNING TO PEDESTRIANS AND BICYCLISTS - Under the new law, the amount of insurance coverage for No-Fault PIP medical benefits available to a pedestrian or bicyclist injured by a vehicle through a spouse’s or resident relative’s insurance policy has changed. In the past, a pedestrian or bicyclist would be entitled to “unlimited” medical benefits under these policies.
Now – after July 1, 2020 – a pedestrian’s No-Fault PIP medical benefits will be limited to whatever coverage levels were chosen in the pedestrian’s policy or the policies of his or her spouse and/or resident relative. If No-Fault coverage is not available to a pedestrian or bicyclist involved in a car accident through his or her own auto insurance policy or the policies of a spouse or resident relative, then the new No-Fault law requires that the pedestrian apply for benefits through the Michigan Assigned Claims Plan. The new No-Fault law limits the pedestrian’s PIP medical benefits coverage to $250,000. Under the old law, the accident victim would have been eligible for unlimited, life time PIP benefits.
Information above provided by Liss Seder & Andrews, Michigan Auto Law, and the Coalition Protecting Auto No-Fault
Recommended Car Insurance Coverage For New No-Fault Law
Making Smart Choices: A Summary Guide to the New Auto No-Fault Law ©
Coalition Protecting Auto No-Fault website
Department of Insurance and Financial Services website
Public Act 21 of 2019
Public Act 22 of 2019
2019 MAJ No-Fault Evening Forum Recordings & Materials
2019 No-Fault Institute Recordings & Materials
2019 Liens Evening Forum Recordings & Materials