NO-FAULT AUTO REFORM
Changes are Coming for Michigan Auto Insurance
On May 20, 2019 Governor Gretchen Whitmer signed and passed Senate Bill 1, also known as the No-Fault Auto Reform Law. While the intention of this bill was to lower premiums for our insured drivers, the coverage insureds were extended also change and some people who had coverage under the prior law may find they no longer do. Additionally, the bill made changes to Michigan’s unlimited Personal Injury Protection coverage and now provides each insured a choice in the amount of coverage they wish to purchase.
Understanding these changes and what they mean are of utmost importance in making sure that you are selecting the right coverage options for your needs.
What is Personal Injury Protection?
Personal Injury Protection (PIP), is the portion of your automobile policy that covers your auto related injuries. Currently for the state of Michigan, coverage is unlimited for life and follows the driver and the vehicle involved. There is no time limit, co-payment or yearly deductible associated with PIP claims. PIP covers medical and non-medical items related to auto injuries.
What Does PIP Cover?
PIP covers more than just medical expenses. Every auto accident is different so the extent of how much PIP coverage you may need will differ from person to person. The following is a small list of expenses that are covered as part of your PIP coverage:
- Ambulance services
- Emergency room visit
- Prescription medications
- Rehab services
- Home and vehicle modifications
- Items “reasonably necessary” for care/recovery/rehabilitation/treatment
- Medical equipment – crutches, wheelchair, prosthetics
- Case managers
- Long term care services
- In home attendant care
- Replacement services
What PIP Options Will I Have?
On your renewal AFTER July 1, 2020 policyholders will have the following PIP options:
UNLIMITED: - This is what your policy currently provides. Any and all medical related expenses are covered under the personal auto policy PIP portion. This option will cover things that may not be covered by health insurance, such as rehabilitation and attendant care. Maintaining this option would significantly reduce the risk that you will have out-of-pocket costs for your care. This option will result in a 10% rate reduction in your PIP medical premium.
$500,000: - This option will reduce your PIP protection to the limit selected. It will cover costs that may not be covered by health insurance, such as rehabilitation and attendant care, but only up to the $500,000 limit. Any medical expenses above this limit not covered by health insurance would be your responsibility. Anticipate a 20% rate reduction in your PIP medical premium.
$250,000: - This option will reduce your PIP protection to the limit selected. With this option, any medical expenses above this limit, not covered by health insurance, would be your responsibility. There will also be an option to exclude coverage on an individual or policy level. To be excluded, the named insured and/or household member(s) must have “qualified health coverage” that is not Medicare. Any individual who is excluded will have no PIP medical coverage. Anticipate a 35% rate reduction in your PIP medical premium.
$50,000: - This option will reduce your PIP protection up to the limit selected. It will cover costs that may not be covered by health insurance, such as rehabilitation and attendant care, but only up to the $50,000 limit. With this option, any medical expenses above this limit, not covered by health insurance, would be your responsibility. This option will result in a 45% rate reduction in your PIP premium. This option is only available to the following individuals:
Named insured must be enrolled in Medicaid AND
Any spouse or resident relative in the household must have “qualified health coverage”, be enrolled in Medicaid, or have coverage payable from another Auto Policy
Policy exclusion – NO COVERAGE: - This option removes all PIP medical coverage. This option is only available to the following individuals:
The Named Insured must be enrolled in Medicare (Parts A and B); AND
Any spouse or resident relative in the household must have “qualified health coverage” or have coverage payable from another Auto Policy
To be a “Qualified Health Coverage”, your primary health insurance deductible must be $6,000 or less per individual.
What Happens if a Person Does Not Qualify for Coverage Under My Policy?
Prior to no fault reform, all Michigan residents had unlimited medical coverage under the Michigan Catastrophic Claims Association fund. After June 11, 2019, when No-Fault reform was signed into law, some policies/people no longer qualify for the unlimited medical and instead may find limited coverage under the Michigan Assigned Claims Plan which is capped at $250,000.
What Happens if I Have Qualified Health Coverage and it Stops?
Within 30 days of losing your qualified health coverage, you must notify your automobile insurance in order to update your personal auto policy. Failure to do so could result in the claim being turned over to the Michigan Assigned Claims Plan. A person that fails to notify their auto insurer or has not obtained new qualified health coverage within 30 days could be denied any PIP medical benefits.
Who has Coverage Under my Policy?
Never assume that just because a driver is listed on your policy they are properly covered. Michigan No-Fault Reform changed who is covered by a Personal Automobile policy. Your automobile policy covers the named insured, their spouse and any resident relatives. Who is covered as a “resident relative” will be determined at the time of loss and the insurance company’s definition may be different than yours. This is a significant change that can affect many families. Do you have a driver that does not reside in the house with you? A boyfriend/girlfriend that live together and are drivers on the same auto policy? These individuals may have a gap in coverage as PIP no longer extends to the named insured’s non-relatives who live in the household or relatives who do not reside in the household.
Vehicle is titled to parent but furnished to their non-resident son/daughter for regular use
Non-married couple residing together
Vehicles owned by named insured but garaged outside of Michigan
Child living out of household – has bills at another address, W2 at a different address, does not come home
How Much Will I Save?
Every situation is unique. While some people may see a decrease in premium, others may not. Keep in mind that the “savings” only affect one portion of your total auto insurance premium. Your savings will also depend on the coverage limit chosen by each policyholder.
How do I Know What Liability Limit to Choose?
Your Bodily Injury Liability limit is the maximum amount that a personal auto policy will pay if an insured driver is sued for being at fault in an auto accident. You are legally required to carry liability insurance on vehicles operated in the state of Michigan. Prior to No-Fault reform, lawsuits for medical expenses were less likely due to our unlimited Personal Injury Protection. Now that individuals have the option to select lower PIP limits, we will see more drivers turn to litigation in order to cover medical expenses they no longer have coverage for. Selecting a liability limit is important for your financial protection. You may also want to consider purchasing a Personal Umbrella Policy to provide additional liability limits due to the increased litigation risk.
What Does No-Fault Reform Mean for Me?
90 days prior to your renewal, you will be mailed two forms allowing you to select and acknowledge your Bodily Injury Liability limit and your Personal Injury Protection limit. Both forms must be completed and returned to the agent/carrier prior to your policy being renewed. Having an independent agent who understands these forms will be crucial to making sure you are selecting the correct option for yourself and your loved ones.
If you choose to have Bodily Injury Liability limits less than $250,000/500,000, you will be required to complete and return the Bodily Injury Liability selection form prior to EVERY renewal. You will also be required to sign a Personal Injury Protection limit form acknowledging your PIP selection. If you fail to complete and return the forms your policy will renew with the default limits of $250,000/500,000 (or higher if you already carry a higher limit) for Bodily Injury Liability and Unlimited limits for PIP.
What do We Recommend?
As with every insurance decision, no two situations are the same. To give you and your loved ones the best protection, we recommend you maintain your Unlimited PIP coverage. We also recommend talking with one of our agents to assist in your decision and answer any questions you may have.
- Department of Insurance and Financial Services - Michigan's New Auto Insurance Law
Michigan's New Auto Insurance Law
How Will my Coverage be Affected When Operating a Motorcycle?
Currently motorcycle riders are not entitled to purchase PIP benefits under their motorcycle policy. There are no changes to this restriction under the new law. A motorcyclist involved in an accident with a motor vehicle will continue to receive PIP benefits from the insurer of that motor vehicle or its operator. Prior to the new law, that motor vehicle operator would be required to have unlimited PIP coverage. After July 2, 2020, however, the motorcyclist will be limited to the PIP limit selected by the motor vehicle’s policyowner or operator. If no PIP coverage is available from the insurer of the motor vehicle or its operator, a motorcyclist is eligible for up to $250,000 in PIP benefits from the Michigan Assigned Claims Plan. A motorcyclist that is involved in an accident that does not involve a motor vehicle will not be eligible for PIP benefits from the Michigan Assigned Claims Plan.
What Happens to Pedestrians or Bicyclists Injured by a Motor Vehicle?
The information above should not be construed as legal or professional advice. It is based on information gathered from carriers, news resources and sources we believe reputable. Please consult your agent to discuss specific terms, coverages, conditions, exclusions and amounts.