Michigan drivers will experience changes to Michigan’s no-fault auto insurance law effective July 1, 2020, with changes effective July 2, 2020. No-fault reform can be a confusing topic for drivers. There has been some discussion in the media and online regarding these no-fault auto insurance changes for Michigan. We’ve been receiving many questions from our clients, and we understand these changes will be of importance to our clients as their auto insurance renews.
This FAQ is here to help answer your no-fault auto insurance questions. We want to provide you with all the information needed to make proper and informed auto insurance decisions for you and your household in Michigan.
A 3-minute video rundown: Michigan No-Fault Auto Insurance Changes for 2020 – Intro
WHAT IS MICHIGAN’S NEW NO-FAULT AUTO INSURANCE LAW?
The new law focuses on changes to the Personal Injury Protection (PIP) portion of your auto insurance premium.
Currently, Michigan drivers typically carry unlimited medical coverage to pay for expenses if injured in an auto accident. If you have health insurance that coordinates with your auto insurance, you could also choose an “excess” medical option.
The new law will allow Michigan drivers a choice. Choose a specific level of PIP medical coverage when your policy renews after July 1, 2020. Ask your agent for details.
HOW AND WHEN DID THIS LAW GET PASSED?
The law was the result of Michigan lawmakers writing a bipartisan, no-fault insurance bill that was signed by Michigan’s Governor Gretchen Whitmer on May 30, 2019.
WHEN DOES THE NEW LAW TAKE EFFECT?
The new law takes effect when your policy renews on or after July 1, 2020.
DOES ANYTHING IN MY POLICY CHANGE IF I RENEW ON JUNE 30, 2020?
No, the changes are effective on July 1, 2020.
HOW MUCH MONEY WILL I SAVE ON MY AUTO INSURANCE PREMIUMS?
It depends on the coverage you choose. You may be hearing in the media about a 10-40% reduction in your auto premium. Keep in mind that any cost savings to you will be on the PIP portion coverage only, not on your total insurance premium.
If you choose to retain the unlimited PIP coverage, you’ll see an approximate 10% reduction in your yearly PIP coverage. For example, if your vehicle’s yearly PIP premium is $250, you’ll see a savings of $25.00.
WHAT IS PERSONAL INJURY PROTECTION (PIP)?
PIP is medical and rehabilitation benefits if you’re in an auto accident and you’re injured, whether temporarily or permanently. Starting July 1, 2020, you’ll choose your coverage amount, ranging from unlimited coverage (the current Michigan law) to lower levels, or even waiving PIP coverage altogether if you qualify. You’ll see PIP as a line of coverage on your insurance declaration page.
WHAT ARE MY NEW PERSONAL INJURY PROTECTION (PIP) CHOICES?
You may choose to stay with an unlimited PIP benefit or select a different level of coverage. Keep in mind you may open yourself and your household to higher risk in the event of an auto accident.
Let’s use our above example of a vehicle’s yearly PIP premium being $250, and apply the reduction to the different PIP coverage levels drivers will be able to choose from.
|COVERAGE LEVEL||PIP PREMIUM ROLLBACK||YOUR ESTIMATED YEARLY SAVINGS|
|Keep Unlimited PIP Benefit (current law)||10% PIP reduction||$ 25|
|$500,000 PIP Benefit||20% PIP reduction||$ 50|
|$250,000 PIP Benefit||35% PIP reduction||$ 87.50|
|$50,000 PIP Benefit (must be enrolled in Medicaid)||45% PIP Reduction||$112.50|
(must be enrolled in Medicare Part A & B)
|100% PIP reduction||$250|
|Qualified Health Coverage Exclusion
(all members of the household have other health/accident coverage that does not exclude or limit coverage for injuries related to an auto accident and has an annual deductible of $6,000 or less per individual)
|100% PIP reduction||$250|
SO, THERE MAY BE A SMALL SAVINGS FOR MUCH LESS COVERAGE THAN UNLIMITED PIP. WHAT DOES THIS MEAN IN THE EVENT OF AN ACCIDENT?
If you remain with the unlimited PIP choice, your medical expenses from a covered auto accident are paid. If the cost is more than $580,000 the Michigan Catastrophic Claims Association (MCCA) fund steps in and reimburses the insurance company for your medical bills. There are no out-of-pocket costs to you.
When an accident occurs, a Michigan driver receives unlimited, lifetime medical benefits as part of the no-fault law.
If you select $500,000 maximum PIP, your insurance company will cover up to $500,000 of medical costs. Then the incident reverts to your medical insurance (if your medical insurance coordinates with your auto policy), and you pay up to your yearly deductible amount.
If your medical insurance doesn’t coordinate with your auto policy, you’ll be responsible for any medical bills or long-term care needed beyond the $500,000 elected limit. In addition, any out-of-network or deductibles and co-pays from your health insurance will apply.
The same scenario applies with $250,000 PIP benefit or $50,000 PIP benefit, just with lower coverage limits of $250,000 or $50,000.
If you are eligible to opt-out altogether because you have both Medicare Part A & B – and you MUST have both parts, A & B – then all your medical bills will be processed through Medicare.
If you are eligible to opt-out altogether with a Qualified Health Coverage Exclusion, your medical coverage must coordinate with your auto policy and have an annual deductible of $6,000 or less. Your medical bills will be processed through your medical insurance.
Remember, your new Personal Injury Protection (PIP) choices are:
- Unlimited coverage (current law prior to July 1, 2020)
- $500,000 PIP benefit
- $250,000 PIP benefit
- $50,000 PIP Benefit (must be enrolled in Medicaid)
- Medicare Opt-Out (must be enrolled in BOTH Medicare Part A & B)
- Qualified Health Coverage Exclusion: no PIP (all members of the household have other health/accident coverage that does not exclude or limit coverage for injuries related to an auto accident and has an annual deductible of $6,000 or less per individual)
HOW DO I KNOW IF MY MEDICAL INSURANCE COORDINATES WITH MY AUTO POLICY?
Contact your health insurance company and speak with a customer service agent. Ask specifically if your medical insurance will provide care in the event of an auto accident.
DO I NEED TO COMPLETE THE PIP ELECTION FORM?
We’ve created a flowchart to help you understand the actions you need to take with the form depending on the Personal Injury Protection (PIP) option you select.
WHAT IS BODILY INJURY LIABILITY (BI)?
Bodily Injury Liability (BI) is auto insurance coverage that pays for injuries a driver causes to other people, including other drivers, passengers, and pedestrians. This part of your auto insurance policy covers medical expenses, lost wages, and pain & suffering up to your policy limit.
Current minimum BI coverage option:
- Up to $20,000 for a person hurt or killed in an accident
- Up to $40,000 for each accident if several people are hurt or killed
- Up to $10,000 for property damage in another state.
Starting in July 2020, the new minimum BI coverage option:
- Up to $50,000 for a person hurt or killed in an accident
- Up to $100,000 for each accident if several people are hurt or killed
- If there is a valid Michigan No-Fault policy in place, coverage applies to the injured party and passengers involved in the auto accident as long as it occurs in the United States or Canada (must be named insured or spouse/resident relative).
Additionally, there will be options to elect higher BI coverage of:
- $250,000 / $500,000 or
- $500,000 / $1,000,000 if you choose.
DO THE AUTO INSURANCE CHANGES AFFECT THOSE RELATED TO ME WHO MAY DRIVE MY CAR, BUT DON’T OWN A CAR?
There has been a change regarding coverage of a “resident relative of the household”. Consider the following scenarios:
- Do you have children (such as college students) who are using a vehicle titled in your name, but have established residency elsewhere?
- Do you live with someone (who is not a spouse or relative) who does not have his or her own insurance, but drives a vehicle titled in your name?
If you answer “yes” to either question, these individuals may no longer be covered under your auto policy. This change became effective on June 11, 2019. Claims processes and notifications of these changes will vary by insurance carriers.
You may want to consider a Named Non-Owned auto policy. This type of policy can be purchased per driver.
WHAT IS A NAMED NON-OWNED AUTO POLICY?
A Named Non-Owned auto policy is a policy that covers a driver who doesn’t own their own car and has their own auto insurance. It’s a liability policy in the event this driver has an accident with another driver and is found to be at fault. This type of policy provides liability coverage for bodily injury and property damage, purchased per driver.
A Named Non-Owned policy can protect those individuals in times that they do not own a vehicle that’s titled and registered in their name. Protection for liability is important even if they do not own a vehicle. Many things can go wrong when driving, and a non-owner policy would provide protection if they borrow a friend’s or family member’s vehicle.
Learn more about this option in our video solution: Named Non-Owned Policy
IF I ASK A QUESTION OF MY CURRENT AGENT REGARDING MY COLLEGE STUDENT’S LIVING SITUATION, WON’T THAT RAISE A RED FLAG?
Lack of full disclosure to the insurance company can put the entire policy into jeopardy of being rescinded and no coverage is in effect. Being honest with your agent is actually part of the contract you are signing with the insurance company. Your agent is here to explain options and coverage available to you that will fit your unique situations.
ARE THERE ADDITIONAL CONSIDERATIONS FOR SENIOR CITIZEN DRIVERS?
Older drivers have additional different options for Personal Injury Protection (PIP) coverage. However, the driver must consider what Medicare covers and what Medicare doesn’t cover in the event of an accident. To simplify, we’ve created a chart below so you may compare coverage side-by-side.
WHAT WILL I HAVE TO DO TO MAKE A CHANGE IN MY PIP CHOICE? IS THIS FORM EASY-TO-UNDERSTAND, OR WILL I NEED AN ATTORNEY?
You will have to review and sign a 4-page form, selecting the level of coverage you are electing. The form, issued by the State of Michigan’s Department of Insurance and Financial Services (DIFS), details all your choices.
The new law requires that insurance agents and insurers must give you the form. You’ll have to sign the form. You could ask your attorney for feedback and advice.
WHAT IF I DON’T WANT TO CHANGE FROM THE UNLIMITED PIP CHOICE?
You’ll have to review and sign the Department of Insurance and Financial Services (DIFS) form regardless of the PIP choice level, as everyone’s levels will remain at the Unlimited PIP level with new policies effective July 1, 2020.
WILL I HAVE TO SIGN A NEW DEPARTMENT OF INSURANCE AND FINANCIAL SERVICES (DIFS) PIP CHOICE FORM EVERY YEAR?
This remains an open question. The Department of Insurance and Financial Services (DIFS) has not provided clarification yet on this point.
We don’t have definitive information on if the form will suffice with a one-time signature, or if the form will have to be reviewed and signed on a yearly basis. Rest assured, we will provide more information and update this section once we receive the information.
I KEEP HEARING THE TERMS “UNDERINSURED” AND “UNINSURED”. WHAT’S THE DIFFERENCE BETWEEN “UNDERINSURED” AND “UNINSURED”?
Underinsured refers to coverage that steps in when you’re in an accident with an at-fault driver whose liability limits are too low to cover the liability or medical expenses.
Uninsured motorist coverage protects you if you’re in an accident with an at-fault driver who doesn’t have any automobile insurance.
HOW DOES THE MICHIGAN CATASTROPHIC CLAIMS ASSOCIATION (MCCA) WORK FOR MICHIGAN DRIVERS?
The Michigan Catastrophic Claims Association, created by the state in 1978, collects fees and then distributes funds in the event of an accident. All Michigan drivers pay a fee of $220 per vehicle (the amount in 2019-2020). This fee goes toward the association’s fund.
So, when an accident occurs, a Michigan driver receives unlimited, lifetime medical benefits as part of the no-fault law – it’s seamless to the injured. The MCCA reimburses insurers when a claim surpasses $580,000.
IF I REACH MY LIMIT OF INSURANCE UNDER THE PERSONAL INJURY PROTECTION (PIP) AND BODILY INJURY LIABILITY (BI) PROTECTION I SELECTED, THEN WHERE DOES ANY OTHER MONEY COME FROM?
Once you’ve reached your coverage limit under the PIP and BI lines of your policy, an injured party can come after your personal assets. An umbrella policy might be a good consideration for your situation.
WOULD AN UMBRELLA POLICY HELP PROTECT ME WITH THE MICHIGAN NO-FAULT AUTO INSURANCE CHANGES?
An umbrella policy does just what it sounds like – it’s an additional policy that covers you. It provides extra liability insurance that reaches beyond the limits of your current auto (home, or watercraft) insurance and protects your net worth.
WHAT IF I SUFFERED A PREVIOUS INJURY IN AN AUTO ACCIDENT AND I’M ALREADY RECEIVING PAYMENTS?
If you are already receiving payments from an auto accident that occurred in the past, or an accident that occurs between now and July 1, 2020, you will continue to receive the current unlimited benefit. This is regardless of the PIP amount you choose in the future.
I HAVE QUESTIONS NOT ANSWERED HERE. WHAT SHOULD I DO?
First, all Michigan residents are working through this historic change together. We’re right there with you.
Second, there are some portions of this no-fault reform that are still unclear.
Therefore, as soon as we receive any new and additional information, rest assured that Mason-McBride will update this page.
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The information, examples and suggestions presented in this material have been developed from sources believed to be reliable, from a variety of sources including industry, regulatory and legislative. They should not be construed as legal or other professional advice.
This material is for illustrative purposes and is not intended to constitute a contract. This material is presented for educational purposes only.
Please consult your specific insurance contract for actual terms, coverages, amounts, conditions, and exclusions.