Auto insurance laws have changed recently, providing Michigan residents with new options. As of July 1, 2020, when you purchase or renew an auto insurance policy, you may have the choice to opt-out of buying personal injury protection (PIP). Having this option may benefit you by lowering your insurance payment but it also has additional considerations.
Before this change, Michigan had the highest auto insurance benefits, but it also had the highest costs. Due to the high insurance costs, many residents didn’t purchase an auto insurance policy and were driving uninsured.
Governor Gretchen Whitmer signed the no-fault insurance auto reform law to help those struggling to pay for insurance and give residents more options. Some residents have health insurance policies that cover automobile injuries and may not need this coverage in their auto insurance policy. Whether you have a healthcare policy covering PIP or not, you will better understand what coverage is best for you and your family by learning more about the Michigan auto reform.
Overview of the Michigan auto reform
Michigan auto insurance policyholders were previously required to buy a policy that included unlimited medical benefits. These medical benefits would provide lifetime coverage to drivers who were in auto accidents and obtained injuries. Unlimited PIP would also cover the other driver if you caused an accident.
The new insurance law states that Michigan residents no longer need to purchase unlimited PIP. There are six options residents may now choose from, though not all residents will qualify for all six.
Six PIP coverage options
- Unlimited (Full coverage, with an average reduction of 10%)
- $500,000 (an average reduction of 20%)
- $250,000 (an average reduction of 35%)
- $250,000 (with medical PIP exclusions, 35% reduction)
- $50,000 (must be on Medicaid, 45% reduction)
- No coverage (must be enrolled in Medicare)
While lower-cost options may sound ideal, there are other factors to consider if you decide to take on one of the new coverage options. Without unlimited PIP, you can be sued by other drivers to cover their related expenses if you cause an accident. Out of pocket costs you may have to pay include lost wages, medical bills, child-care, long-term care, attorney fees, car repairs, and property damage.
You should weigh your options carefully because while this new law has the potential to save you money, it could also become costly should the unexpected happen.
What ruling has been implemented into this auto reform?
To qualify for the new policies, Michigan residents must be able to provide the proper documentation. Without documentation, residents will be required to continue paying for their no-fault insurance, which includes unlimited medical benefit coverage.
At each renewal, if the insured wants to limit their PIP coverage to lower their premium, one of the following types of documentation will be required to prove that they have the proper coverage to do so.
Health and accident coverage
With this type of coverage, a resident will need to provide their insurance agent with a letter from their insurer stating the names and birth dates of all family members covered.
This letter will need to state whether their healthcare policy provides qualified health coverage and includes coverage for motor vehicle accidents.
Michigan residents with Medicaid will need to provide copies of their Medicaid cards.
Michigan residents with Medicare will need to provide copies of their Medicare cards.
Another Auto Policy
Residents will need to provide their insurance agent with a copy of their other auto policy to show that they already have PIP medical coverage through another company.
Who will be affected by this?
All Michigan residents who are auto insurance policyholders are affected by this new auto reform. Those who have Medicare and Medicaid will qualify for all six of the new limited coverage options. As older adults typically drive fewer miles a year than younger adults, this could benefit their wallets. However it could also put their assets at a higher risk in the event of a lawsuit following an accident.
For those who were previously struggling to afford auto insurance, the auto reform law could be beneficial as well. While one of the newer plans may not have unlimited coverage, any coverage is better than no coverage.
While having options may positively affect many Michigan residents, it is essential to consider that it may be best to stick with an unlimited plan. Factors in your decision should include your healthcare insurance coverage, personal risk tolerance, and current and long-term financial situation. It is always best to speak with an insurance agent to determine what type of coverage is best for you specifically.
Where can I find out more information?
Talk to your agent or connect with Frost and Remer today, and we can help you choose the level of protection that is best for you.
We would be happy to provide you with a full review and risk assessment to ensure that you receive the best coverage at prices that you can afford. While we offer phone appointments, we are also scheduling virtual appointments for a more personal connection.