What do the Changes to Michigan’s Auto Insurance Law Mean for You?
The most significant amendments to the Michigan No-Fault law take effect on July 1, 2020. For the past year, the headlines have been filled with news about changes to the Michigan auto insurance law. There has been repeated mention of the expense of automobile insurance and the need for reform. What do the changes mean for you, your family or your business? We may not give it much thought, but driving and riding in a car have great risk – risk of injury, as well as risk of being sued for the negligent driver or owner.
The following is a brief explanation of the big changes happening to Michigan law governing car accidents.
Michigan law has required, and will continue to require, an owner of an automobile to obtain automobile insurance, including mandatory Personal Injury Protection (PIP) and bodily injury coverages. PIP coverage is essentially coverage that you obtain to pay for your own medical treatment and wage loss (among other benefits) if you are injured in a car accident. The “no-fault” part of the name refers to the fact that your own insurance provides these benefits regardless of if you were at fault in an accident. Bodily injury coverage is essentially the insurance that protects you if you are at fault in an accident and get sued by someone you injured.
Arguably the biggest change to the law is that Michigan residents will no longer be required to buy lifetime medical expense coverage for injuries sustained in a car accident. If you do not purchase lifetime PIP medical expense coverage, there will be an option for tiered coverage, either at $500,000 or $250,000. A $50,000 or even an opt out provision is also available for some people with Medicaid, Medicare or other coverages. This means, for example, that for a reduced premium you could decide to obtain $250,000 in PIP medical expense coverage, in which case your insurance would only pay up to $250,000 in medical expenses on your behalf and you would be liable for any additional medical expenses.
Due to these changes, your insurance carrier will now be providing you with forms to fill out in order to select your tier coverage and to affirmatively state your understanding that you may be selecting less than lifetime medical expense coverage.
Should you decide to elect less than full medical expense coverage in reliance on your private health insurance, remember that you may need to change your auto insurance coverage if you have a change in employment or health insurance coverage. Similarly, if you choose to opt out, you will need to change your auto insurance coverage within 30 days if you no longer qualify for Medicaid or Medicare.
Significantly, out-of-state residents are now excluded from qualifying for PIP benefits. However, there is an exception for an out-of-state resident who owns a motor vehicle registered in Michigan.
For an employee injured in a motor vehicle accident in the course of employment, the PIP changes are largely inapplicable since workers’ compensation benefits are generally primary over PIP benefits in Michigan.
A less publicized change is that the required amount of bodily injury coverage is being raised from $20,000 per person/$40,000 per accident to $250,000 per person/$500,000 per accident, with an option to reduce it to $50,000 per person/$100,000 per accident. These are the amounts that your insurance will pay to protect you per person or per accident (if more than one person is injured) should you be sued for your negligence.
Another important change is the recoverable damages. Currently, Michigan law limits the recovery in a bodily injury case to damages for pain and suffering, as well as excess wage loss. However, now an injured person will also be able to recover excess PIP expenses from you if he or she chose a PIP tier less than unlimited. This means that, as an owner or driver of an automobile in Michigan, we will also have exposure for the medical expenses incurred by someone we injure due to our negligence in a car accident.
Will These Changes Save You Money?
Will these changes save you money? Maybe not. The general idea of these changes is that the lack of required lifetime PIP medical expenses should decrease the cost of car insurance. However, the increased exposure and higher required bodily injury limits may cause an increase in cost which offsets the savings on the PIP side. There are other changes being made, such as limiting how insurance carriers are able to set premiums and a fee schedule for medical expenses, which are designed to decrease the cost of the overall insurance, but this begs the question of whether you should opt for anything less than lifetime PIP medical expenses.
In the big picture, the savings for opting for tiered PIP coverage rather than lifetime coverage is relatively minimal. The new law requires a 25% to 35% decrease on the PIP portion of your car insurance premium, but this should not be confused with a decrease in your full auto insurance premium.
As an example, I recently reviewed the premium for my 22-year-old daughter’s insurance for her 2018 Fusion. She pays approximately $1,050 every six months; of which only $155 is allocated for PIP. Were she to opt for the $250,000 PIP expense tier, she would save 35% on that portion of her premium, which equates to a savings of approximately $54. Granted, there is an associated payment for the Michigan Catastrophic Claims Association (the MCCA -the entity that exists to pay for medical expenses for people catastrophically injured in car accident) of $100 which will be reduced or eliminated depending on the coverage you choose. The real question is whether that savings of $150 to $200 is worth the sacrifice of a lifetime medical expense benefit.
This is more than a dollars and cents decision. You should think about what happens if you opt for tiered coverage, are involved in a serious car accident, and incur medical expenses or need treatment in excess of your limited PIP coverage. How will you pay for this “excess” treatment? Will you even be able to receive the excess treatment? One option may be private health insurance – but you will need to make sure that your health insurance covers automobile accidents. Think about this – will you have private health insurance? Many get their health insurance coverage through employment. What if you are no longer able to work and no longer have private health insurance? What if you have private health insurance, but have a high deductible and cannot afford to treat? Automobile insurance does not include copays or deductibles. What about your choice of doctors or facilities? There are no restrictions on choice of doctors or facilities under the No-Fault system. What if you do not have private health insurance? You are then potentially looking at Medicaid, Medicare or, possibly, bankruptcy.
What Should You Do?
Most importantly, consider your own specific life situation and financial needs. Beyond just talking about the costs for certain packages, talk with your insurance agent to decide what makes the most sense for you, your family and your business.
To have insurance protection approaching what you had before these changes, you would need to opt for unlimited PIP coverage and consider raising or maintaining your bodily injury limits at an appropriate level. Remember, keeping the same bodily injury limits as before the changes really is not the same amount of coverage because there is additional exposure. Additionally, if you do not already have uninsured and underinsured motorist benefits, talk to your agent about these important benefits that provide protection if you are injured by someone who is either uninsured or does not have enough insurance to cover your injuries in a car accident.
Another consideration is an umbrella policy which can provide “extra” coverage that would be applicable to various types of policies, such as auto and homeowners. Keep in mind that many insurers offer reduced premiums when you purchase multiple policies.
Insurance is expensive. However, unless you absolutely cannot afford automobile insurance without opting for the lesser protections available under the new No-Fault law, we highly recommend that you consider retaining lifetime PIP medical expense coverage, as well as appropriate negligence coverages.
Joel Ashton focuses his practice on insurance defense, including Michigan No-Fault claims (PIP, automobile negligence, uninsured/ underinsured motorist), as well as premises liability and general negligence. His practice also includes the defense of contract and liability claims, contract interpretation issues, subrogation claims involving automobile, fire and casualty, commercial and related coverage. Mr. Ashton maintains an AV Preeminent Rating from Martindale-Hubbell, which is the highest possible rating an attorney can achieve for both ethical standards and legal ability. He may be reached at (734) 261-2400 or firstname.lastname@example.org.