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Grand Ledge, MI 48837

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Michigan's Auto Insurance Reform Q&A

What is Michigan’s auto insurance reform?

Today, Michigan drivers are required by law to have a No-Fault automobile insurance policy that includes Personal Injury Protection (PIP) benefits. While several states in the U.S. also have No-Fault requirements, Michigan's No-Fault law is unique in that the PIP coverage provides for unlimited medical benefits for the lifetime of the injured person when those injuries result from an auto accident. On July 2, 2020, many changes to the existing no-fault auto insurance law will take effect, including giving Michigan drivers a choice in their level of PIP coverage. Under the new plan, drivers will be able to choose from up to six options for Personal Injury Protection coverage.

Why is Michigan changing the law?

Since 1973, all Michigan automobile insurance policies have had to provide unlimited Personal Injury Protection benefits. If you qualified for PIP benefits because you were injured in an automobile accident, you could get lifetime medical benefits for treatment related to your care, recovery or rehabilitation. It sounded like a great idea at the time — but as health care costs and the frequency of lawsuits continued to rise, it meant that auto insurance costs rose significantly, too. Today, Michigan has the 4th most expensive auto insurance in the country. Unsurprisingly, it is also ranked 4th in the U.S. with about 20% of drivers uninsured.

When will auto insurance reform happen?

While some parts of the law are already active, the parts that impact your selection options for PIP coverage go into effect on July 2, 2020. You don't have to do anything until you renew your policy, but in order to make the transition easy for you and your family, you can make your new selections in advance of your renewal date.

What is Personal Injury Protection? What are Allowable Expenses?

Personal Injury Protection (PIP) helps cover expenses that arise as a result of injuries sustained in an auto accident. In Michigan, PIP covers these expenses regardless of who caused the accident or who is at fault.

The main coverage provided by PIP is for "allowable expenses," also known as PIP AE. Allowable expenses are "reasonable charges incurred for reasonably necessary products, services and accommodations for an injured person’s care, recovery or rehabilitation." This includes services like medical expenses, attendant care and nursing. Today in Michigan, your PIP AE coverage is unlimited. That means all of your medical costs are paid for — for as long as they're necessary for your care, recovery or rehabilitation.

What are my Personal Injury Protection Allowable Expenses (PIP AE) coverage options?

Starting July 2, 2020, when you renew your auto insurance policy, you'll need to make a decision on your PIP AE coverage limit.3 Your choices will be:

OPTIONS AVAILABLE TO EVERYONE

  • Unlimited: This is the level you have right now
  • $500,000 limit
  • $250,000 limit

LOWER COST OPTIONS AVAILABLE IF YOU HAVE QUALIFIED HEALTH COVERAGE, MEDICAID OR MEDICARE

  • $250,000 limit with PIP exclusion5 (Individuals who purchase this option will not be eligible for any PIP allowable expenses.)
  • $50,000 limit: Medicaid only6
  • Allowable Expenses Opt-out: Medicare only7

When the time comes to renew your policy, we can help provide you information.

What will my savings be when the new auto insurance law takes effect?

Today, every driver in Michigan is required to have unlimited Personal Injury Protection Allowable Expenses (PIP AE) coverage on their policy. When part of Michigan's new auto insurance reform law takes effect on July 2, 2020, you'll be able to choose from different levels of PIP AE coverage.3 Depending on the specific coverage levels you choose, you may pay less for PIP AE coverage.

OPTIONS AVAILABLE TO EVERYONE

  • Unlimited4: 10% average savings
  • $500,000 limit: 20% average savings
  • $250,000 limit: 35% average savings

LOWER COST OPTIONS AVAILABLE IF YOU HAVE QUALIFIED HEALTH COVERAGE, MEDICAID OR MEDICARE

  • $250,000 limit with PIP exclusion5 - Individuals who purchase this option will not be eligible for any PIP allowable expenses: 100% average savings
  • $50,000 limit (Medicaid only6): 45% average savings
  • Allowable Expenses Opt-out (Medicare only7): up to 100% average savings

Keep in mind that this savings is off of the medical portion of the policy only. Not the entire premium.

If you decide to reduce your PIP AE coverage, you may want to weigh other coverage levels on your policy, like your Bodily Injury coverage limits, so you select limits to help meet your needs.

How will the new law impact my auto insurance policy?

The short answer is that it means you have a choice to make. When you renew your policy after July 2, 2020, you can keep your unlimited Personal Injury Protection Allowable Expenses (PIP AE) coverage limit, which is the same coverage you have today.

But if you choose a PIP AE option with less than unlimited coverage — or the $250,000 PIP Exclusion6 — you may want to factor in your own personal risk tolerance and financial situation. For example, what happens if you're severely injured in an accident and your medical bills exceed your new coverage limit? Do you have enough health insurance to cover those bills? If you can't work, do you have disability coverage available? If you get sued for the accident, do you have savings or other assets that could be at risk?

These are all things you'll need to think about. The good news is our agents are here to help provide you information.

What can I do to prepare?

Once the new coverage options go into effect on July 2, 2020, you won't need to take any action until it's time to renew your policy. In the meantime, here are some steps you can take to prepare:

  • Review your policy: The new law impacts your Personal Injury Protection Allowable Expenses (PIP AE) coverage, but that's just one of the coverages included in your auto insurance policy. Make sure you're familiar with all your coverages and your current limits. That'll help when it comes time to renew and choose your PIP AE limit.
  • Consider your assets: When you make changes to your policy limits, there’s more to think about than how much it costs. Lower coverage limits could expose you to medical bills or lawsuits. If you have savings accounts, a 401k, a home or other valuable assets, they could be at risk.
  • Talk to your family: If you have a spouse or children, you’re not the only one impacted by these changes. Discuss your plans with your family so everyone understands your coverage moving forward.
  • Reach out to your agent: If you still have questions, please call us at any time. In Grand Ledge you can reach us at (517) 622-5020 or in Grand Rapids (616) 456-9790.

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