What is the new Michigan auto insurance law?
The new Michigan auto reform law was designed to provide more affordable auto insurance in the state by allowing drivers to select more coverage options.
When does the new law go into effect?
The new law goes into effect for any new policy and renewals beginning July 2, 2020 or later.
Why was the law changed?
Michigan had the highest auto insurance benefits, but also had the highest costs. Mandatory unlimited Personal Injury Protection (PIP) medical benefits proved too expensive for many Michigan families. Some drivers who could not afford costly unlimited coverage were driving uninsured. Drivers will now have a choice to reduce their premiums for the medical portion of (PIP) by making their own selection of medical coverage (PIP).
What is Personal Injury Protection (PIP) coverage?
PIP covers medical bills and lost wages when you or your passengers are injured in a car accident. The cost of PIP coverage varies based on your coverage limit selection.
PIP consists of:
Allowable Medical Expense Coverage – Accident related medical bills and expenses, unlimited in time, including mileage for related appointments. You can choose from the following limits:
- Unlimited $
- $500,000
- $250,000
- $250,000, excluding certain drivers
- $50,000
- Opt-Out
Wage Loss – If you are disabled in an auto accident, PIP will pay up to 85% of your wages, subject to a monthly maximum amount that is adjusted annually based on state legislation.
Replacement Services – A daily limit of $20 per day to reimburse people who assist with “ordinary and necessary services”, such as:
- Child Care
- Lawn Care
- Laundry
- Housekeeping
- Non-medical transportation
- Shopping/delivery of groceries
Attendant Care –This will pay a set hourly amount for care involving your recovery care and rehabilitation and includes services such as:
- Safety and Supervision
- Medical Transportation
- Mobility Assistance
- Dressing and Undressing
- Toilet Needs
- Showering
- Personal Hygiene
- Cooking and Feeding
- Administering medication
- At home exercise or physical therapy
Previously, there was no limit to the dollar amount payable under Attendant Care and this became a huge source of fraud. To combat this, it is now limited to 56 hours per week if it is rendered by a friend, relative, housemate or a person with a social or business relationship.
What is Bodily Injury (BI) coverage?
BI pays for injuries to others in a car accident in which you are at-fault that are not covered by their insurance or are damages not realized in the form of medical bills such as pain and suffering. Your bodily injury coverage limit must meet the new state required minimum of $50,000 per person and $100,000 per accident, however, we feel that is insufficient coverage and recommend you select a limit of at least $250,000/$500,000 or higher.
Bodily Injury (BI) minimum limits.
With the new law, the state required minimum Bodily Injury limits will increase from $20,000 per person/$40,000 per accident to $50,000/$100,000. There will be a new default level of $250,000/$500,000 if you do not make your own selection on renewal.
Why did the state require BI limits to be increased?
There are two types of damages you can sustain in an auto accident, Economic Damages and Non-Economic Damages. Economic Damages are your directly related medical expenses and could include things like ambulance transportation, hospital stay, medical procedures, etc. These are things you can be billed for. Non-Economic Damages are damages you sustain that are more along the lines of ongoing pain and suffering and mental anguish and cannot be billed for.
Previously, you could only sue the at- fault driver for your Non-Economic Damages as everyone had unlimited coverage for PIP for their Economic Damages. Now that you can select lower limits for PIP than unlimited, you can also now sue, or be sued, for uncovered Economic Damages as well as Non-Economic Damages.
This means everyone can potentially be sued for more and you will need a higher limit of liability for BI than before to better protect yourself. We also recommend purchasing an Umbrella Liability policy for additional liability protection.
How much will my insurance premium reduce under the new law?
Average savings can vary from up to 10% to 100% of your PIP premium only, depending on the PIP medical coverage selection. It is important to note that the savings is on the medical portion of your premium only, not the entire policy.
Who is insured under PIP coverage?
PIP coverage includes the named insured(s), the named insured(s) spouse and resident family members in the household.
Can I still choose unlimited personal injury protection (PIP) on my (Michigan) insurance policy?
Yes. If you do not make a new PIP selection, your renewal will be issued with unlimited PIP medical coverage.
How do I go about making my selections for PIP and BI under the new law?
If you are starting a new auto policy effective 7/2/2020 or later, you will be required to make those selections and sign forms verifying your selection. If you already have a policy in effect, prior to your renewal, you will receive information from your insurance company containing your options and the forms to make those selections. Some companies are sending that via email if they have that on file and you may even be able to do it all electronically using e-signature. Alternatively, for any policy already in effect, the process varies by company, but you should be able to effectively change your policy and make these selections with an effective date of 7/2/2020 or later.
Sample PIP Medical Coverage Form
Sample Bodily Injury Coverage Form
Can I opt out of purchasing PIP medical coverage in Michigan?
Drivers with Medicare Parts A & B or other Qualified Health Coverage may decide to opt-out of their no-fault PIP medical benefits for auto insurance policies issued or renewed on July 2nd, 2020 or later.
What is Qualified Health Coverage?
Health or accident insurance that does not exclude or limit coverage for auto accidents and has an annual deductible of $6,000 or less, per individual. Additionally, Medicare parts A & B are considered qualified. It is important to note that Medicaid is not considered Qualified Health Coverage.
How do I find out if my health insurance is Qualified Health Coverage?
Contact your health insurance carrier and ask if they limit or exclude coverage for auto related injuries. Check to ensure you do not have an individual annual deductible of higher than $6,000.
Why do I need to buy PIP coverage on my auto insurance if I already have health insurance?
Your health insurance may have many different co-pays, deductibles and limitations of coverage. PIP has only one deductible that you choose, there are no co-pays and the limitation in coverage amount is the limit you select. Also, your health insurance may not cover things like Wage Loss, Replacement Services or Attendant Care.
How does a non-relative living with me have proper coverage for PIP?
They either need to be listed as a named insured on your policy, have a policy of their own or be a named insured on someone else’s policy.
Why do you need to know all of my resident relatives?
Since the law has changed, who qualifies for PIP coverage on the auto policy is now limited to only include the named insured(s), the named insured(s) spouse and resident family members in the household. We want to ensure everyone in your household you might assume is covered, is in fact covered.
Why do you need to know the health insurance information for everyone in my house?
The type of health insurance everyone has will determine what coverage options you will be eligible for since some of the options require all household members have Qualified Health Coverage.
OK, so what coverage should I choose?
While the changes in the law certainly allow for more choices in coverage, they also expose everyone to a higher risk of lawsuit. We recommend everyone carry the highest limits you can afford, however, at minimum, you should have the following limits of Liability coverage:
- Residual Bodily Injury – $250,000 Per Person / $500,000 Per Occurrence
- Property Damage – $250,000
- Uninsured Motorist Liability – $250,000 Per Person / $500,000 Per Occurrence
- Underinsured Motorist Liability – $250,000 Per Person / $500,000 Per Occurrence
- Personal Injury Protection – Unlimited
- Limited Property Damage Liability (Mini-Tort) – $3,000 (Limit is not optional)
We also strongly recommend adding an Umbrella Liability policy as well. An Umbrella policy is an inexpensive, additional layer of liability, sold in $1,000,000 increments, that “sits” above your other personal insurance policies like your home and auto. Should you be sued and the limits on your auto or home insurance are not enough, your Umbrella Liability policy will step in with an additional layer of coverage for you. These policies can be surprisingly inexpensive and some companies even offer multi-policy discounts on the auto and home policies for purchasing an Umbrella policy. In many cases, the discount alone can pay for most or all of the cost of the Umbrella policy itself.
We feel it is also extremely important to point out, that due to these changes in the law, if you have not made your new selections for coverage under reform and signed the appropriate forms, particularly for Bodily Injury coverage, you are now immediately exposed to a higher risk of liability since you can now be sued for uncovered Economic Damages if you are found at-fault in an accident. We encourage everyone to immediately change their auto insurance policies, at minimum, to the coverage levels mentioned above. As always, please give us a call at 1-800-644-6030 with any questions and we’ll be happy to help!
Robert H. Bourdeau
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