How Much Car Insurance Do I Need Under the New Michigan No-Fault Law?

Many Michigan drivers are bewildered by the extensive and unprecedented No-Fault insurance reforms taking effect this month. The most frequent question seems to be, “How much car insurance do I need in Michigan?” This is because, starting July 1, 2020, drivers can choose their preferred level of Personal Injury Protection (PIP) medical coverage. In addition, motorists may choose different amounts of bodily liability insurance, and uninsured and underinsured motorist coverage. The Michigan No-Fault system has always been one of the most complex insurance systems in the country. And, the new laws have made things even more confusing. Here is a guide to help you choose the best No-Fault coverage options for you and your family.

What is Personal Injury Protection (PIP) coverage for car insurance?

Since No-Fault took effect in 1973, every Michigan policy holder was required to have unlimited lifetime Personal Injury Protection (PIP) medical benefits. This coverage was comprehensive, especially for people who required extensive medical care after a serious injury accident. However, this unlimited coverage resulted in Michigan drivers paying the highest auto insurance rates in the country.

In addition to unlimited lifetime medical coverage, PIP benefits also pay 85% of lost wages and up to $20/day for replacement services such as household chores for up to three years.

Furthermore, if a victim died as a result of an auto accident, the deceased’s dependents were eligible for survivors’ loss benefits for up to three years.

All of these benefits are generally provided by the vehicle owner’s insurance company, regardless of who was at fault for the accident.

How did Personal Injury Protection (PIP) coverage change under the new No-Fault car insurance law?

Under the new law, the Personal Injury Protection (PIP) coverage for lost wages, replacement services and survivors benefits remains the same.

However, effective July 1, 2020, the rules for Personal Injury Protection (PIP) medical coverage have changed.

Instead of mandatory unlimited lifetime medical benefits, motorists can choose from one of the following six options:

Option 1 – Unlimited PIP Medical Coverage (same as old law)

This option provides the same unlimited lifetime medical coverage that was required under the old No-Fault law. It pays for all allowable medical and related expenses for an injured person’s care, treatment, recovery and rehabilitation, including many medical expenses that are not covered by most health insurance plans. Policy holders that want to retain their previous level of medical coverage may do so by choosing this option.

Option 2 – Limited PIP Medical Coverage of $500,000

If you choose this coverage limit, your insurance company will cover up to $500,000 per person per accident in Personal Injury Protection (PIP) benefits for medical and related expenses.

Option 3 – Limited PIP Medical Coverage of $250,000

This option limits Personal Injury Protection (PIP) coverage to $250,000 per person per accident for medical and related expenses.

Option 4 – Limited PIP Medical Coverage of $250,000 with Exclusions

This option allows policy holders who choose limited coverage of $250,000 to opt out of Personal Injury Protection (PIP) medical coverage for themselves, a spouse or a resident relative. To qualify for exclusion, the person(s) must have their own qualified health care coverage – other than Medicare or Medicaid – that covers motor vehicle accident injuries. Anyone who is excluded will have no PIP medical coverage under the No-Fault policy.

Option 5 – Limited PIP Coverage of $50,000 – for Medicaid Recipients only

This option, which caps Personal Injury Protection (PIP) benefits at $50,000 per person per accident, is only available to applicants or named insureds who are enrolled in Medicaid. In addition, the insured’s spouse and any resident relatives on the policy must have their own qualified health care coverage that covers auto accident injuries. This coverage can be provided by Medicaid, private insurance or a separate No-Fault policy that includes PIP benefits.

Option 6 – No PIP Medical Coverage

This option is only available to applicants or named insureds who are covered under Medicare Parts A and B. In addition, the insured person’s spouse and any resident relatives covered by the policy must have their own qualified health care coverage that covers auto accident injuries. This includes private insurance or another auto policy with PIP medical coverage.

How do I decide how much car insurance I need?

There is no “one-size-fits-all” policy under the new No-Fault car insurance law. Every policy holder must weigh the pros and cons of each option to decide what is right for themselves and their families.

However, there are some things to consider about each of the various options.

• Unlimited lifetime PIP medical coverage

While this option provides the most complete coverage, your premium rates are not likely to decrease. If this is a concern, ask your insurance agent how your rates will be affected if you retain your current PIP medical benefits.

• Limited PIP medical coverage of $500,000 or $250,000

It’s important to know that insurance companies will not pay medical costs that exceed the policy limits. Therefore, if you or someone on your policy suffers a catastrophic injury, the resulting medical bills could be devastating. However, if you are covered under another health insurance plan, that coverage would take over after your PIP benefits were exhausted.

• Complete opt-out of PIP medical coverage (for Medicare recipients or those with other qualified health care plans)

While your premium will probably be lower than before, you should know that neither Medicare nor health insurance plans provide the same coverage as unlimited lifetime PIP benefits.

With unlimited PIP benefits, all reasonable and necessary services are covered, regardless of the duration of treatment.

In contrast, Medicare and most health insurance plans do not cover certain things such in-home attendant care, long-term custodial care, electric wheelchairs, home and vehicle modifications, medical mileage to and from the doctor and case management services.    

How much liability (bodily injury) coverage do I need?

Liability coverage protects motorists who cause an accident that injures or kills another person(s). Since 1973, the minimum amount of required bodily injury coverage was $20,000 per person and $40,000 per accident.

As of July 1, 2020, the minimum liability limits for No-Fault policies will increase to $50,000 per person and $100,000 per accident. However, the default amount on your new premium bill will be $250,000 per person and $500,000 per accident. You have the option of selecting greater or lesser coverage amounts as long as the minimum level of $50,000/$100,000 is met.

However, with the recent changes in the No-Fault law, drivers have a far greater risk of being sued. For example, suppose a motorist causes an accident that seriously injures another person. If the victim has limited Personal Injury Protection (PIP) medical coverage, their treatment is likely to exceed their benefits. In that case, the injured party can file a lawsuit against the at-fault driver for damages which includes the excess medical bills. The at-fault driver could risk losing their savings and other personal assets if they have insufficient liability insurance.

Therefore, it is advisable to purchase as much bodily injury insurance as you can afford. In addition, you may want to talk to your insurance agent about optional “umbrella coverage” to provide additional liability protection.

How much uninsured and underinsured motorist coverage do I need?

Uninsured motorist coverage protects you and your family members in case of an accident caused by a driver who has no auto insurance. Similarly, underinsured motorist coverage protects you in the event of an accident caused by a driver with insufficient liability insurance.

For example, suppose you have selected a limited amount of Personal Injury Protection (PIP) medical coverage, $250,000 or $500,000. If you are seriously injured in a car accident and require extensive treatment, your medical bills could easily exceed those limits. And, if the accident was caused by a driver with limited liability insurance, you could be faced with devastating medical bills.

Accordingly, it’s wise to purchase as much uninsured and underinsured motorist coverage as you can comfortably afford.

How long do I have to decide how much car insurance I need?

The new laws governing coverage options for Personal Injury Protection (PIP) medical benefits and liability insurance took effect July 1, 2020. Nevertheless, you can change your policy amounts at any time by calling your insurance agent. There are no “enrollment periods” as with some health care plans.

What’s more, if your situation changes, you can adjust your car insurance coverage as often as necessary. For example, suppose you’ve opted out of Personal Injury Protection (PIP) medical benefits because you were covered under your employer’s health care plan. If you lose that coverage, you can opt back into PIP medical coverage through your No-Fault policy.

However, you only have 30 days to obtain new coverage, either through your No-Fault policy or another health care plan. If you are without health care coverage after

30 days and you are injured in an accident, your medical care will not be covered.

Why does my new premium bill show that I have unlimited PIP medical coverage and $250,000/$500,000 bodily injury (liability) insurance?

The car insurance companies are including certain default coverage amounts on bills for renewals or new policies. If you wish to select a different option for PIP medical benefits or liability coverage, you will have to notify your insurance agent. 

If you are unsure of which Personal Injury Protection (PIP) medical benefits are right for you and your family, consult a knowledgeable insurance agent.

And, if you or a loved one is injured in an accident, call us. Our experienced and compassionate legal team is ready to fight for your rights to the compensation you deserve.

Michigan No-Fault law is complicated, but finding the right auto accident attorney is simple.

Call 1-800-CALL-SAM today for a free, no-obligation remote consultation from the safety of your home.

Sources:

https://www.michigan.gov/autoinsurance/0,9555,7-405-96601_96926—,00.html

https://www.freep.com/story/money/business/2020/06/27/michigan-drivers-july-cheapest-rates/3235498001/

https://www.michigan.gov/documents/autoinsurance/FIS-PUB_6350_685280_7.pdf