Effective July 2, 2020 The Michigan's auto insurance system commonly referred to as PIP (Personal Injury Protection) is changing significantly. We are here, prepared and ready at the Sheila Hughes Insurance Agency to help our clients navigate these changes and stay well informed of Michigan No Fault Reform.
Let's begin with a brief history; the Michigan No Fault system began in 1973, it was designed to help injured persons achieve maximum recovery after accidents and to ensure that auto accident victims were reimbursed promptly. It was argued by many that the tort or "at fault" system was deficient with too much time and money being wasted on attorneys fighting over who was at fault. While the attorneys were fighting, no lost wages or medical bills were being paid. The Michigan legislature decided that every person would get their own insurance policy regardless of fault that included unlimited medical payments. The trade off for this self insurance and quick payment of benefits was you could not sue the "at fault" driver unless you sustained injuries of a serious and permanent nature. The No Fault system however, failed to achieve most of these objectives. There have been many challenges, such as the rising cost of auto insurance for Michigan drivers. Claim costs associated with providing unlimited lifetime medical benefits has driven up the cost of auto insurance, leading to Michigan auto insurance rates being the highest in the nation. Many motorists choose to drive without insurance at all, placing additional stress on the system. It is because of these challenges that lawmakers recently passed reform to the Michigan No Fault Law.
WHAT'S NEW FOR MICHIGAN DRIVERS?
Previously, all drivers had to buy unlimited Personal Injury Protection (PIP) benefits, starting July 2, 2020, drivers will be able to choose from different coverage options:
- Unlimited PIP coverage
- $500,000 limit
- $250,000 limit
- $250,000 limit with PIP medical exclusion(s); this option is for drivers who have qualified health coverage (not Medicaid or Medicare) that covers auto accident injuries. (This option is available if your spouse and other relatives who live with you have qualified health coverage that will cover auto accident injuries.)
- $50,000 limit; this option is only for drivers who are enrolled in Medicaid. (This option is available if your spouse and other relatives who live with you have qualified health coverage that will cover auto accident injuries.)
- Opt-out of PIP coverage entirely; however, you, your spouse and all relatives who live with you must have Medicare or qualified health insurance to be eligible.
WHAT IS THE IMPACT TO RATES?
Insurance companies must reduce PIP premium rates, and guarantee that they will be reduced for eight years. The rate reduction applies only to PIP premiums, which is one part of your entire auto insurance cost. The reduced amount will depend on the PIP coverage that a driver selects – the higher the coverage, the lower the reduction. For example:
- Unlimited coverage - 10% reduction (this option is the same PIP currently available)
- $500,000 in coverage - 20% reduction
- $250,000 in coverage - 35% reduction
- $50,000 in coverage - 45% reduction
- Individuals with Medicare or a qualified health insurance could opt out and receive a 100% rate reduction on certain portions of PIP, depending on their individual circumstances. The “Qualified health coverage” — which may include an employer-sponsored group health plan cannot exclude or limit coverage for injuries related to motor vehicle accidents, and has an annual deductible of $6,000 or less per individual. . Medicare (Parts A and B) coverage also meets this definition.
There are other changes that impact rates:
- Non-driving factors can’t be used to set insurance rates for personal auto policies. Factors include postal zone, credit scores, home ownership, education level and occupation.
- Minimum liability coverage limits will be increased from $20,000 per person and $40,000 per accident to $50,000/$100,000. The policy will default to $250,000/$500,000 (or $510,000 for commercial auto policies) if the policyholder does not make a choice.
- Policyholders will be given the option to select their PIP coverage at each renewal; selection forms will be sent at each renewal.
- Tort damages will be recoverable for excess allowable expenses and work loss. And, the “Mini-Tort” damage cap will increase from $1,000 to $3,000 for accidents occurring after July 1, 2020.
- The order of determining who will pay for a no-fault claim – called the “order of priority” – has changed in some cases involving:
- Relatives who do not reside in the household of the named insured unless they are away at school. These relatives (such as your children) would need to have their own insurance policy, even if they are driving a car you own.
- Non-relatives who reside in the household, even if they are listed drivers. They would need to have their own insurance policy.
In addition the Michigan Catastrophic Claims Association (MCCA) vehicle assessment fees are changing. Last year, the MCCA increased its fees to $220 per vehicle. For the period beginning July 2, 2020 through June 30, 2021, that fee will now be decreased to $100. The fee will only be charged to people who opt to continue unlimited personal injury protection, or PIP. Those choosing the new Opt out option will not pay the MCCA charge.
WHAT IS THE IMPACT TO BODILY INJURY (BI)?
BI pays for injuries to others in a car accident in which you are at fault. Your BI coverage limit must meet the new state required minimum of $50,000 per person and $100,000 per accident. It is very important that you consider the impact of inheriting significantly increased financial exposure from bodily injury damages as a result of PIP reform. Those motorist choosing lower PIP benefits will now be able to sue the "at fault" driver for their injuries, for wage loss, pain and suffering and dependent care. The $250,000/$500,000 coverage limit is the new default minimum limit if you don't take action, $50,000/$100,000 is the minimum bodily injury (BI) allowed (you must choose this limit) . Considering these changes, we strongly suggest that you elect higher BI limits, and/or add a personal umbrella policy to better protect your family's assets and future earnings.
The team at the Sheila Hughes Insurance agency is here, stop in, call, email or text us with any questions or just to begin the conversation about NO Fault reform. 248- 478-3100