Michigan No-Fault Reform Information And FAQ
Dear Valued Clients,
Michigan No-Fault Reform takes effect this year. This new law offers drivers more choices, as well as changes to their auto insurance. While some of these changes will be phased in over time, most will go into effect on July 2, 2020. The two major changes are the new limits and defaults for Personal Injury Protection (PIP) and Liability Coverage (Bodily Injury).
Rest assured that Michigan Community Insurance understands these changes and how they apply to our valued clients. As all of Michigan adopts No-Fault Reform, we aim to be your trusted advisor in protecting the things that matter to you most . Our dedicated team is ready to provide you answers and help guide you through these new choices.
Thank you for putting your trust with Michigan Community Insurance Agency.
What's Happening At A Glance
Auto Reform primarily impacts two of your mandatory coverages, medical coverage, or Personal Injury Protection (PIP), and liability coverage, or Bodily Injury (BI). When you renew your policy after July 2, 2020, you can keep your unlimited medical (PIP) coverage limit or you can choose from new options. At the time of your policy renewal, your BI coverage limit will now default to a new limit of $250,000/$500,000 unless you were already at that limit or higher.
These are all things you’ll need to think about. Our knowledgeable team is ready to help you through any additional questions you may have after reviewing these FAQs.
Currently, Michigan drivers are required by law to purchase Unlimited Lifetime medical benefits (PIP). Michigan is the only state that requires unlimited medical benefits. Beginning with your first renewal after July 1, 2020, you can keep Unlimited Lifetime medical benefits or you will have the option to purchase a lower limit. Under the new plan, drivers will be able to choose from up to six options for medical coverage (PIP).
While some parts of the law are already active, the parts that impact your selection options for PIP coverage go into effect on July 2, 2020. You don’t have to do anything until you renew your policy, but in order to make the transition easy for you and your family, you can make your new selections in advance of your renewal date.
Since 1973, all Michigan automobile insurance policies have had to provide unlimited medical (PIP) benefits. If you qualified for PIP benefits because you were injured in an automobile accident, you could get lifetime medical benefits for treatment related to your care, recovery or rehabilitation. It sounded like a great idea at the time — but as health care costs and the frequency of lawsuits continued to rise, it meant that auto insurance costs rose significantly, too. Today, Michigan has the most expensive auto insurance in the country and the highest limit for coverage (unlimited).
Your Auto Medical Coverage (PIP)
Medical coverage (PIP) helps cover expenses that arise as a result of injuries sustained in an auto accident. In Michigan, PIP covers these expenses regardless of who caused the accident or who is at fault.
The main coverage provided by PIP is for “allowable expenses,” also known as PIP AE. Allowable expenses are “reasonable charges incurred for reasonably necessary products, services and accommodations for an injured person’s care, recovery or rehabilitation.” This includes services like medical expenses, attendant care and nursing. Today in Michigan, your PIP AE coverage is unlimited. That means all of your medical costs are paid for — for as long as they’re necessary for your care, recovery or rehabilitation.
When you renew your policy after July 1, 2020, you can keep your unlimited medical (PIP) coverage limit, which is similar coverage you have now.
But if you choose a PIP limit with less than unlimited coverage ($500,000, $250,000, $50,000 or exclude PIP medical coverage) you may want to consider your own personal risk tolerance and financial situation. For example, does your health insurance cover auto related accidents on a PRIMARY basis? What happens if you’re severely injured in an accident and your medical bills exceed your new coverage limit? If you can’t work, do you have disability coverage available to pay for your lost wages?
These are all things you’ll need to think about. The good news is our agents are here to help provide you information
Medicare Parts A & B coverage also allows you to opt out of PIP Allowable Expenses but has additional eligibility criteria that applies to all other members of your household, while Medicaid coverage allows you to choose a special, low-cost, $50k coverage option.
With the new auto insurance reform law going into effect in July, unlimited medical (PIP) coverage is no longer required. While this new option will help reduce the cost of auto insurance for many who choose lower levels of PIP Allowable Expenses coverage, it also means that drivers may need to rely more on their personal healthcare insurance coverage if they’re hurt in an accident. It is important to remember that there are many differences among health plans and coverage for auto accidents is not always included. It is important to understand your health coverage when selecting your new PIP limits.
In order to use health insurance to eliminate some or all of your PIP coverage you, or members of your home, need to have what's called "Qualified Health Coverage". This new term (QHC) includes individual or employer-sponsored plans that fully cover auto-related injuries and have a deductible of $6,000 or less per person. You or members of your household who have Qualified Health Coverage may select an exclusion for PIP coverage. Check with your health insurance provider to see if your plan is eligible. If your plan is eligible, you will need a letter from your health carrier indicating you have coverage for health related accidents.
Your Auto Liability Coverage (BI)
In Michigan, liability (BI) coverage pays when you are responsible for seriously hurting or causing the death of another driver, passenger or pedestrian in an auto accident. It can help pay for medical expenses, lost wages, and legal and funeral expenses. It also includes some damages not covered by medical (PIP) coverage, often referred to as pain and suffering.
Prior to July 2, 2020, if you could not be sued for the medical expenses (economic damages) of the other people involved in the accident. That has changed, and the other party now has the right to sue for their medical expenses. As a result, Michigan has raised the minimum liability (BI) limits and set a new default of $250,000 per individual and $500,000 per accident.
BI coverage only protects you up to the limits you choose. So, if you’re thinking about choosing a lower level of liability (BI) coverage, it’s important you know the potential financial risks. If you’re responsible for an auto accident that hurt someone or results in a person’s death, and the costs are higher than your coverage limit, you’ll need to pay the difference. If you can’t:
• Your assets may be seized (including pensions) or a lien may be placed on your home.
• Your wages, or potential for future wages, may be garnished.
• Your driver’s license may be suspended.
You'll want to evaluate the total amount of your assets that could be at risk and consider adding an extra layer of protection through an Umbrella Policy. An Umbrella can add another $1,000,000 or more in liability coverage. An Umbrella policy becomes much more important with the changes to the No-Fault system and the anticipated increase in lawsuits. Contact us to discuss adding an Umbrella policy that will extend your Auto Insurance liability limits and Home/Boat Insurance (if applicable).
Other Common Questions
If you make no new choices with your Auto policy, your policy will renew with Unlimited PIP coverage (highest limit) and your liability (BI) coverage will renew at $250,000/$500,000, if currently below that limit. Recall if you already have $250,000/$500,000 or higher, then you would see no change to your liability limit (BI).
When your policy renews, you would also automatically get the mandated premium reductions on your medical coverage (PIP/MCCA).
Once your Auto policy renews, after July 2, 2020, you will automatically get the mandated premium reductions for the medical portion of your policy. Every policy will see a minimum $120 decrease per vehicle. This decrease is part of the PIP medical portion of the policy. If you have liability (BI) limits below $250,000/$500,00 then you could see an increase in premium on that portion of your policy. Each customer could be impacted differently depending on the number of vehicles you have, your current limits, and your risk tolerance.
There are options to choose a PIP coverage lower than Unlimited, as discussed above. These lower limits also include reductions in premium. Please contact us to evaluate your specific policy and customize the limits and pricing to fit your needs.
As your policy renewal date approaches, you will receive new forms from your insurance company by mail, or electronically. These forms allow you to select different limits for your medical (PIP) and your liability (BI). If you do not sign and return the forms, your policy will renew with the highest limit for medical (PIP) which is Unlimited (the same limit you have today). Your liability (BI) coverage would also increase to $250,000/$500,000, if your policy limits are currently below that amount. If you have have questions about your new options before your policy renews, please contact us.
We understand that every customer is unique, has various insurance needs, and different tolerances for risk. That is why it is important to use an independent insurance agency such as Michigan Community Insurance, as we can evaluate multiple MI insurance companies to find you the right amount of coverage for your insurance dollar.
One provision of the law that went into effect in 2019 could create a possible gap in insurance coverage depending on who lives in your household. Most notably, with these new changes your Auto insurance will not provide medical (PIP) coverage to anyone who is not you, your spouse and/or resident relatives driving a vehicle titled in your name. For these types of situations a separate policy or a policy customization is needed to medical (PIP) coverage for that unrelated person.
Example: Your significant other (unmarried) lives in the home, he/she is listed on the policy and drives a vehicle titled to you. Their is no PIP coverage for that person's injuries in the event of an auto accident.
There could be other situations depending on who lives in your home, please contact us if you would like to discuss possible gaps for your insurance.
Auto Reform also may impact your vehicle insured for your business. Each business auto policy is unique in its structure and the way in which the vehicles are used. For example, employees who use business vehicles for personal use or a primary vehicle.
There are two main issues that impact business autos under the new law:
1. Each vehicle (including business autos) will automatically receive the reduced premium cost related the current MCCA charge. The charge is currently $220 per vehicle, and it will be reduced to $100 per vehicle when the policy renews.
2. The liability environment has changed. That is, injured parties can now sue for their medical expenses (economic damages). The anticipated increase in liability lawsuits is another reason to make sure your business is protected with additional liability coverage through an Umbrella policy.
Our agents can help you evaluate any other impacts to your business auto insurance or potential gaps in coverage based on your vehicle use. Don’t hesitate to contact us with any other questions.
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