Having insurance coverage means being prepared for the unexpected. If an auto accident happens, the last thing you want to worry about is whether your insurance has you covered.
As Michigan auto reform goes into effect on July 2, 2020, it’s important to proactively reach out to your insurance provider to understand how these changes impact your coverage. At Frost & Remer we’re setting up virtual appointments via Zoom to consult with all of our clients.
Schedule a virtual appointment for your full policy review
and risk assessment from Frost & Remer.
We can help you navigate your level of personal protection on the road, as well as your premiums.
What is Michigan auto insurance reform?
The new law brings important changes for Michigan auto policyholders. There are three significant changes related to auto insurance:
- Personal Injury Protection (PIP)
- Contributory Negligence and No-Fault
- Reduced medical fees and Michigan Catastrophic Claims Association costs
Michigan drivers have been legally required to have no-fault auto insurance, which includes Personal Injury Protection (PIP) coverage. Before July 2, auto insurance in Michigan has provided for unlimited medical benefits for the lifetime of the injured person when those injuries result from an auto accident.
This has been required since 1973 and seemed like a benefit to drivers. Over time, however, the rising healthcare costs and frequency of lawsuits caused auto insurance premiums to increase to help insurers cover these expenses.
One aspect of this is explained through a study that shows that Michigan insurance companies have paid the highest medical rates of any state for auto-related injuries. This is caused by unlimited medical benefits, high use of expensive medical services, and the absence of a medical fee schedule for auto-related injuries.
With Michigan auto insurance reform, drivers will choose their level of PIP coverage, rather than having it be strictly unlimited. The law’s changes to Contributory Negligence rules and MCCA costs will also affect drivers’ coverage and costs.
What does PIP coverage do for you?
PIP coverage, or no-fault insurance, helps you cover expenses such as medical bills, rehabilitative costs, services needed, and damage you did to other people’s property if you or someone else is injured in an auto accident.
With no-fault insurance, you get this coverage regardless of who caused the accident.
Why Michigan’s no-fault insurance differs from other states
With the current Michigan insurance law, PIP coverage provides for unlimited medical benefits for the lifetime of the injured person when those injuries result from an auto accident.
Starting in July, Michigan drivers can choose from up to six options for PIP coverage.
Limiting PIP coverage impacts Contributory Negligence provisions
As PIP coverage will no longer remain unlimited for everyone, Michigan drivers can now be sued for the percentage that they contributed to an accident, which is considered the Contributory Negligence. For example, if you run into a vehicle that is waiting at a traffic light, you’re at fault under the State of Michigan’s rules. In this case, you can be sued for all damages under the new law.
You may be found responsible by the court system for costs including lost wages, medical bills, long term care, attorney fees, car repairs, property damages, and attended care. These expenses will not have a cap or limit.
Raising your Bodily Injury (BI) coverage can provide added protection to avoid this, as it addresses liabilities paid by the driver at fault.
Changes to MCCA costs
Michigan premiums include a fee for catastrophic auto accident injuries. This fee is overseen by the Michigan Catastrophic Claims Association, which reimburses member companies for PIP medical costs that currently exceed $580,000.
With Michigan auto reform, the MCCA is lowering its per vehicle assessment. Michigan drivers could save at least half of their costs for catastrophic claims fees. Drivers that eliminate all PIP coverage will eliminate the MCCA fee under the no-fault reform.
How could the changes affect you?
Is Michigan getting rid of no-fault insurance?
No. Michigan is removing the requirement for unlimited no-fault insurance coverage and allowing drivers to select their preferred level of coverage, depending on their eligibility and personal needs.
Is the price of Michigan auto insurance going down?
Yes. While the new requirement doesn’t guarantee that every driver will see savings, Michigan auto insurance costs on average will be reduced by at least 10%, after July 2 and dependent on the PIP limit a driver chooses.
For customers that choose recommended Bodily Injury and property damage limits of $250,000/$500,000/$100,000, and maintain unlimited PIP protection, the average reduction will be 6% to 7%.
The law requires insurers to discount PIP rates in total across all of their policyholders for the next eight years. Individuals could see bigger or smaller discounts, depending on their overall policy.
What options come with Michigan auto insurance reform?
With the change, drivers can choose from six options for their PIP coverage, which will also impact what they pay for that portion of their insurance. PIP coverage is just one piece of a driver’s policy – keep this in mind when considering how any changes could affect your premium and your coverage.
It is recommended that a person understands what is at stake if they choose to lower their coverage to save on costs. Focusing on both the cost and quality of your coverage is important so you don’t take on unnecessary risks.
A lower coverage limit could reduce the cost of your insurance. However, if you’re in an accident, your auto insurance will only pay for medical expenses up to the limit chosen.
Limited PIP coverage will only provide for some of the compensation after an accident. If it doesn’t fully cover a driver’s losses, one driver could file a lawsuit against the other for further compensation because of Contributory Negligence.
6 new PIP coverage options and their cost reductions
Options available to everyone
- Unlimited PIP coverage (average reduction of 10%)
Current coverage for all Michigan drivers
- $500,000 limit (average reduction of 20%)
- $250,000 limit (average reduction of 35%)
Options available to individuals with certain healthcare coverage
(If family members who live with them also have qualified health coverage that will cover auto accident injuries.)
- $250,000 limit with PIP medical exclusion(s) (average reduction of 35%)
For drivers who have qualified non-Medicaid or Medicare health coverage that covers auto accident injuries.
- $50,000 limit (average reduction of 45%)
For drivers enrolled in Medicaid
- Opt-out of PIP coverage entirely (average reduction of 100%)
For drivers with Medicare
How will it affect your policy?
After the change, you won’t need to take any action until you renew your policy.
When you renew your policy, you can keep the same coverage you have now, with an unlimited PIP coverage limit. Otherwise, you can choose a new PIP option with less than unlimited coverage, which will likely lower your premium.
Consider your risks and other types of coverage
If you lower your PIP coverage limit, consider how much personal risk you’ll take on and how it could affect your financial situation.
If you were severely injured in an accident, your medical bills could exceed your new coverage limit. Could your health insurance help to cover those bills?
Previously, with unlimited PIP coverage, another driver could get unlimited lifetime damages from an insurance company. If you limit your PIP coverage, you could become personally responsible for covering damages beyond what your insurance will pay. If a lawsuit arises, any savings or other financial assets you have could be at risk.
If this is a concern, adjusting your Bodily Injury (BI) coverage might help to address liabilities paid by the driver at fault. BI premiums may rise as the minimums increase from $20,000 per person to $50,000 and $40,000 per accident to $100,000.
This is one of a few additional Michigan auto reform changes that could impact your policy. You can learn more about the law here.
Frost & Remer can do a full risk assessment to help you make an informed decision.
Prepare for Michigan auto insurance reform
Before you renew your policy with new limits, take these steps to prepare:
- Get familiar with your current policy to see how new limits could affect your coverage and costs.
- Beyond the cost of your premium, think through how you want to protect your lifestyle and your financial standing.
- Schedule a virtual appointment for your full policy review and risk assessment from Frost & Remer.
Gain peace of mind knowing you’re protecting not only your wallet but also your life.