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On July 1, 2020, new no-fault auto insurance law takes effect in Michigan. While we don’t typically write about auto insurance in this space, we do frequently write about news that may have an impact on our readers’ finances—and the new Michigan no-fault insurance law certainly qualifies. Insurance reform can be a good thing, and it’s better if you are an informed consumer who understands what the change in the law means for you.
So what exactly is this change? If you are a Michigan driver, you know that you are required to have a no-fault auto insurance policy. A major part of this policy are the Personal Injury Protection (PIP) benefits. Michigan is not the only state in the union with no-fault automobile insurance. But it has been unique in that Michigan’s PIP benefits offer unlimited medical benefits for life for a person who is injured in an auto accident, for care relating to their injury.
As health care costs rose over time, so did the cost of auto insurance in Michigan, due to these PIP benefits. As a result, Michigan is one of the most expensive states in the country in which to purchase auto insurance. It’s no coincidence that, with such high insurance rates, it also has one of the highest rates of uninsured drivers. About 20% of Michigan drivers are uninsured.
What’s Different Under No-Fault Auto Insurance Reform?
When the new law takes effect, one of the changes will be an option for Michigan drivers to choose from up to six levels of PIP coverage. It is estimated that Michigan drivers will save from 10% to 100% on premiums for their PIP coverage. That’s a good thing, right?
Well, maybe. The amount of savings will depend in part on what level of PIP Allowable Expenses (PIP AE) coverage you choose. If you do nothing, simply renewing the policy you have, you will continue to have the PIP benefits you have always had. On the one hand, you may not see much, if any, savings in your auto insurance premium. On the other hand, you will continue to have full PIP AE benefits.
In addition to unlimited coverage, the new PIP coverage options under the law taking effect July 1, 2020 are:
- Up to $500,000 medical coverage (per person, per accident)
- Up to $250,000 medical coverage (per person, per accident). 20% reduction in PIP premium.
- Up to $250,000 in medical coverage (per person, per accident; some exclusions). 35% PIP premium reduction.
- Up to $50,000 in medical coverage (per person, some exclusions). Insured must be enrolled in Medicaid. 45% PIP premium reduction.
- Opt-Out of PIP coverage. This is available to individuals on Medicare Parts A and B, or to households in which all members have health or accident coverage which doesn’t limit coverage for injuries connected with an auto accident; that coverage must also have an annual deductible per individual of $6,000 or less. 100% PIP premium reduction.
If you are not sure whether your medical insurance coordinates with your auto insurance, contact the customer service department of your health insurance provider to ask what coverage is provided in the event of an auto accident.
If you are not sure whether your medical insurance coordinates with your auto insurance, contact the customer service department of your health insurance provider to ask what coverage is provided in the event of an auto accident.
Given the options available, you might, of course, decide to go with one that offers you less than unlimited coverage. That will reduce your premium, but will increase your exposure to risk. So here are some things to think about when making the decision:
- How is your existing health insurance? If you suffer severe injuries in an auto accident, it is possible that your medical expenses will exceed the limit of your coverage. Are you confident that your health insurance can make up the difference?
- What assets do you have that are at risk? If your medical expenses exceed the limit of your coverage, you could be liable for that excess. That could be catastrophic; you could lose assets you have worked all your life for.
This isn’t to say that you shouldn’t consider taking advantage of your options under Michigan’s new no-fault insurance law. But you should consider both your exposure to risk and your risk tolerance, and weigh those against whatever savings you might realize under the new law. Only you can make the decision whether reducing your PIP AE coverage is worth it to you.
Protecting Your Assets from Legal Exposure
Our law office doesn’t sell auto insurance. But we do help our clients protect their assets through estate planning. If your automobile insurance choice under Michigan’s new no-fault auto insurance law leaves you with potentially greater legal exposure in the event of a serious accident, it may be worth taking a look at your current estate plan. Ask yourself (or an experienced estate planning attorney) whether your current estate plan provides the best protection for you. We invite you to contact our law office to schedule a consultation.