Michigan’s No-Fault Auto Insurance Reform Law: What Drivers Need to Know
On July 2, 2020, the second phase of Michigan’s No-Fault Auto Insurance Reform Law goes into effect. The new law, passed in Spring 2019, is the result of pressure long put on Michigan’s politicians to lower auto insurance prices. While many Michigan drivers are excited at the potential for paying lower rates, rate reductions are likely in exchange for medical benefit coverage that protects Michigan’s most critically injured auto accident victims, both medically and financially.
What happens if you don’t choose a sufficient amount of coverage because you are looking to save on your premium? What if you are injured in an auto accident and exhaust your benefit cap – will you get the same level of care you did when a medical provider knew the auto insurer was statutorily obligated to pay your medical bills? Additionally, under the new law, there is the potential that the cost of auto accident related care can bankrupt families.
Here are the biggest policy changes Michigan drivers need to know about the new law:
First: Unlimited Personal Injury Protection (PIP) Coverage is No Longer Required.
Under the current law, paying for unlimited personal injury protection in automobile insurance coverage is mandatory. This means for insured Michigan drivers injured in an auto accident prior to July 1, 2020, medical expenses incurred in that accident are covered as an unlimited, lifetime benefit – regardless of the cost and extent of injuries.
Under the new law, drivers will no longer be required to purchase unlimited no-fault Michigan Personal Injury Protection (PIP) benefits. Drivers now will have the choice of no-fault medical benefit coverage levels, with proportional discounts. After July 2, 2020, if you are injured in an auto accident, the medical expense provision you receive depends on the level of PIP benefits selected. You will be responsible for any medical expenses that exceed your PIP benefit cap.
New Personal Injury Protection (PIP) coverage options (with average rate reductions*)
- Unlimited PIP benefit: 10% rate reduction
- $500,000 PIP benefit cap: 20% rate reduction
- $250,000 PIP benefit cap: 35% rate reduction
- $50,000 PIP benefit cap: 45% rate reduction. Driver must be on Medicaid to qualify.
- No PIP coverage — 100% rate reduction. Drivers are required to be covered under Medicare Parts A and B or have qualified healthcare coverage.
*guaranteed reduction for eight years
Second: In situations where you might be found at fault, you can be held accountable for medical expenses incurred by the injured party that exceed the limits of that person’s insurance policy. This is in stark contrast to the current system where the law requires that the insurer, not the at fault party, pay for medical expenses.
How do drivers protect themselves in the event they are at fault, and the not at fault party lacks adequate insurance coverage? Under the new law, the mandatory amount of liability coverage has been increased to $250,000, but it is also a good time to review your current Bodily Injury limits and consider increasing them. Also, consider adding umbrella coverage. The cost of an umbrella policy is relatively low considering the additional coverage and protection you are getting.
What Does Getting into an Auto Accident Really Cost?
For perspective, one overnight auto accident-related visit to the hospital can quickly exceed $50,000. For catastrophic auto accident-related injuries, lifetime care can easily reach the millions. Remember, for any amount that exceeds the PIP cap you selected, the balance of the bills is up to you.
Furthermore, under the new law, a party injured as a result of your negligence can not only sue you for current medical expenses, but future expenses as well. In the past, when representing individuals who suffered catastrophic injuries, Hakim, Toma & Yaldoo, P.C. has had medical professionals assist in preparing lifecare plans for clients. In those matters, expected costs that have been as high as in the tens of millions of dollars (depending on the injuries).
What about the policy savings?
- The savings for drivers applies only to the PIP portion of the policy (approximately 35% of your bill) – NOT to the entire auto insurance bill.
- For drivers who currently find auto insurance unaffordable, the new law is not likely to substantially lower insurance premiums.
- Any dollars saved through reduced PIP premiums will likely be offset by increases in liability coverage premiums required under the new law.
Which PIP Option Should I Choose?
Our recommendation, and that of our own trusted insurance agents, is to opt for unlimited no-fault auto insurance PIP benefits (essentially, keeping the same policy you currently have). Unlimited PIP benefits ensure accident victims will have access to the medical treatment, services and specialists essential to their care, recovery and rehabilitation. They also provide for victims of life-altering, catastrophic accidents, with injuries such as traumatic brain and spinal cord injuries – without having to worry about how to pay for services, or facing financial ruin after paying out of pocket.