No Fault Insurance Reform
For years, Michigan’s auto insurance rates have continued to rise and are now among the highest costs in the nation. With demand for auto reform getting louder, Governor Whitmer signed Senate Bill 1 (auto reform) into law on 5/30/2019. While the auto reform has many implications, the one that stands out the most is the change to the Personal Injury Protection (PIP) rules. To really understand the impact of the changes, we will briefly outline how the old system worked and how the new system works moving forward.
What is PIP Coverage?
Personal injury protection pays for accident related medical expenses and lost wages after an auto accident.
How did Michigan’s PIP Coverage Work Before July 2, 2020?
Prior to July 2, 2020, all Michiganders were required to carry unlimited PIP benefits. This meant that anyone involved in an accident (whether they were at fault or not) had unlimited coverage. Even uninsured individuals received unlimited coverage due to the order of priority (which insurance company has priority to pay the claims).
Under the old system, if an uninsured driver was in an accident (and their spouse did not have coverage either), the insurance company of the other driver or the insurance company insuring the owner of the car would pick up the tab. If both drivers did not have coverage, the Michigan Assigned Claims Plan (MACP) would provide unlimited lifetime benefits for the injured party. Additionally, under Michigan’s old insurance laws, you could only sue for death, dismemberment and disfigurement.
How Does the New PIP Coverage Work?
Michigan will no longer require that all individuals must carry unlimited PIP coverage. The options are now expanded to allow for five options:
- Unlimited PIP Coverage
- $500,000 limit
- $250,000 limit
- $50,000 limit (if you are on Medicaid)
- Opt-out entirely (only if you have Medicare)
Additionally, the order of claims priority has changed as well. Victims of an accident lean on their insurance first, their spouse’s second, and then the MACP third. However, the MACP maximum payout is no longer unlimited for life; it has dropped to a maximum $250,000.
What happens if you are involved in an accident with someone who is uninsured/underinsured? They will make a claim for benefits under from MACP, but if the expenses are over $250,000, you can expect a lawsuit. We mentioned earlier that Michigan’s prior laws only allowed lawsuits for three reasons; death, disfigurement, and disfigurement. The new reasons have expanded to include the following:
- Underinsured/uninsured victims can sue for allowable expenses in excess of their coverage limits
- Lawsuits can be made for work loss exceeding the three-year PIP benefit
- MACP can sue to recover the benefits they paid out
- Non-residents can sue for injuries in Michigan
- Motorcyclists can sue in certain situations as well
What Does this Mean for Me?
- Your PIP coverage is for you. If you are in a bad car accident, you want to be fully covered for your expenses. We would not recommend decreasing your PIP coverage to save a few dollars in insurance premiums.
- There will be an increased number of lawsuits. This is a good time to beef up your liability and umbrella insurance coverage. If you are involved in an accident, you want to be sure your liability coverage is adequate, especially now that unlimited PIP coverage will not automatically be available for everyone.
- Relatives who do not reside in your home need their own policies and should not be simply listed on your policy (unless they are a student and are away at school). A relative who does not reside in your home and who does not have their own policy will not have any PIP coverage. Your insurance will cover damages to the car but will not provide the personal injury protection that they would have received under the old laws.
If you have not already had a conversation about this with your insurance agent, we highly recommend it. While we covered some of the main points of the auto reform, we did not cover them all. There may be other changes that impact you based on your specific situation, and it would be best to discuss your situation with your insurance agent to determine what changes you may need to make in moving forward. While we do not sell any type of insurance, we are more than happy to have a conversation with you regarding the impacts of Michigan’s new auto reform policy as well as refer you to a reputable agent if you need further assistance.