Michigan drivers will experience changes to Michigan's no-fault auto insurance law effective July 1, 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. As a result, we've been receiving many questions from our clients.
So, 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.
Michigan drivers typically carry unlimited medical coverage to pay for expenses if they are injured in an auto accident. However, 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. When your policy renews after July 1, 2020, you can choose a specific level of PIP medical coverage. Ask your agent for details.
When Did This Law Get Passed?
The law resulted from Michigan lawmakers writing a bipartisan, no-fault insurance bill that Michigan's Governor Gretchen Witmer signed 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 Renewed on June 30, 2020?
No, the changes are effective July 1, 2020.
How Much Money Will I Save On My Auto Insurance Premiums?
It depends on the coverage you choose. The media may mention a 10-40% reduction in your auto premium. However, any cost savings 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 on your yearly PIP coverage. For example, if your vehicle's yearly PIP premium is $250, you'll see a savings of $25.
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 the 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 that you and your household may be at 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 can choose from.
| COVERAGE LEVEL | PIP PREMIUM ROLLBACK | YOUR 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 |
| Medicare Opt-Out (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 |
There is a Small Saving for a Reduced Coverage. What is the impact of this on 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 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 – it's seamless to the injured.
If you select a $500,000 maximum PIP, your insurance company will cover up to $500,000 in 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 a $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 and B—and you MUST have both Part A and B—then all your medical bills will be processed through Medicare.
Suppose you can opt out altogether with a Qualified Health Coverage Exclusion. In that case, 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 before 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 Auto Policy Coordinates with my Medical Insurance?
Contact your healthcare provider and speak with a customer service agent. Ask specifically if your medical insurance will provide care in the event of an auto accident.
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
- Suppose there is a valid Michigan No-Fault policy in place. In that case, 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.
Will Changes in Auto Insurance Affect Family Members Who Drive my 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) using a vehicle titled in your name but have established residency elsewhere?
- Do you live with someone (who is not a spouse or relative) without insurance but driving 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 notification of these changes will vary by the insurance company.
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-Ownded Auto Policy?
A Named Non-Owned auto policy covers a driver who doesn't own a car but has 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-Owner policy can protect individuals who 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.
Will My College Students' Living Situation Raise a Red Flag?
Lack of full disclosure to the insurance company can put the entire policy in jeopardy of being rescinded and no coverage 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 the options and coverage that will fit your unique situation.
How Can I Change My PIP Choices?
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 insurance agents and insurers to give you the form, which you must sign. You could ask your attorney for feedback and advice.
If I Don't Want to Change From the Unlimited PIP Option, What Can I Do?
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 automatically change to the $500,000 PIP level with new policies effective July 1, 2020. You'll have to elect the unlimited option on the form.
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 clarified this point yet.
We don't have definitive information on whether the form will suffice with a one-time signature or if it 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 it.
What's the Difference Between "Under-Insured" and "Uninsured"?
Under-Insured
Under Insured 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
Uninsured motorist coverage protects you if you're in an accident with an at-fault driver who lacks automobile insurance.
How does the Michigan Catastrophic Claim Association (MCCA) Work?
The Michigan Catastrophic Claims Association, created by the state in 1978, collects fees and distributes funds in the event of an accident. All Michigan drivers pay $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) a Bodily Injury Liability (BI), Where Does Any Other Money Come From?
Once you've reached your coverage limit under your policy's PIP and BI lines, an injured party can come after your personal assets. An umbrella policy might be a reasonable consideration for your situation.
Would an Umbrella Policy Help Protect Me with the Michigan No-Fault Auto Insurance Changes?
An umbrella policy is just what it sounds like—it's an additional policy that covers you. It provides extra liability insurance that extends beyond your current auto (home or watercraft) insurance limits and protects your net worth.
What if I have Suffered a Previous Injury?
Suppose you are already receiving payments from an auto accident that occurred in the past or an accident between now and July 1, 2020. In that case, you will continue to receive the current unlimited benefit, 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, some portions of this no-fault reform are still unclear.
Therefore, as soon as we receive any new and additional information, Mason-McBride will update this FAQ. Please stay tuned.
Additionally, feel free to contact us at info@mason-mcbride.com or at (248) 822-7170 to speak to our knowledgeable staff, who are happy to answer your questions regarding your auto insurance needs.
DISCLAIMER
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.