Switching Auto Insurance In Michigan: A Step-By-Step Guide

Michigan's new auto insurance law has brought about sweeping changes, giving drivers more options for personal injury protection coverage, also known as PIP benefits. While personal injury protection has always been mandatory in Michigan, the new reform means drivers can select a PIP coverage that best represents their needs and budget. This has led to lower costs for Michigan drivers, and there has never been a better time for Michiganders to shop for auto insurance. However, every driver (and passenger) in Michigan now faces an elevated level of risk and liability. This means that switching auto insurance in Michigan is a more complex process than in other states, and it is essential that all drivers understand how the new auto insurance law affects their coverage options and liability.

Understanding the new No-Fault law

The new No-Fault Law in Michigan, which came into effect on July 1, 2020, has brought about significant changes to the state's auto insurance framework, impacting every driver and car accident victim. The law was designed to lower insurance costs, strengthen consumer protections, and maintain the highest coverage options in the country. Here's what you need to understand about the new No-Fault Law:

PIP Coverage Options:

The most notable change is the introduction of Personal Injury Protection (PIP) coverage options. Previously, Michigan drivers were required to carry "unlimited" PIP coverage, which provided comprehensive lifetime protection for medical and rehabilitation expenses. Now, drivers can choose from different coverage levels: $50,000 (for Medicaid enrollees), $250,000, $500,000, or unlimited/no limit. This change allows drivers to customize their plans according to their budgets and needs.

Opt-Out Provision:

Drivers who are enrolled in Medicare now have the option to opt out of PIP medical benefits entirely. If they choose to opt out and are subsequently injured in a car accident, No-Fault insurance will not cover their medical expenses. Instead, it is intended that these drivers will rely on Medicare for their medical coverage.

Increased Bodily Injury Liability Coverage:

Starting July 2, 2020, drivers are required to carry higher bodily injury liability insurance coverage. The minimum coverage amounts are now $250,000 per person and $500,000 per accident. However, drivers have the option to purchase lower limits of $50,000 per person and $100,000 per accident if they choose to do so.

Attendant Care Limitations:

Auto insurance companies are no longer obligated to pay for more than 56 hours per week of in-home, family-provided attendant care. This limitation took effect on July 1, 2021, and does not apply to attendant care provided by nurses from commercial agencies or in residential facilities.

Michigan Catastrophic Claims Association (MCCA) Changes:

The MCCA will continue to pay for the medical costs of catastrophically injured car accident victims who have a No-Fault auto insurance policy issued or renewed before July 2, 2020. For policies issued or renewed after July 1, 2020, the MCCA will only cover catastrophic medical expenses if the "unlimited" PIP medical benefits coverage level was selected.

Fee Schedule Implementation:

Starting July 1, 2021, medical providers, including doctors, hospitals, and clinics, must conform their charges for services to a new Medicare-based fee schedule. This change is designed to control costs and reduce fraud in the auto insurance system.

"Excess" Medical Expenses:

If a car accident victim's medical bills exceed their PIP medical benefits coverage level, they can sue the at-fault driver in a third-party tort lawsuit to recover their present and future "excess" medical expenses.

Michigan Assigned Claims Plan:

The Michigan Assigned Claims Plan assigns insurance companies to provide benefits to car accident victims who do not have their own insurance coverage. Under the new law, there is a cap of $250,000 on medical benefits provided through this plan.

Mini Tort Changes:

The maximum recovery amount for vehicle damage under Michigan's mini tort law has increased from $1,000 to $3,000 for accidents after July 1, 2020.

Prohibited Factors for Setting Insurance Rates:

Insurance companies are now prohibited from using certain non-driving-related factors to set car insurance rates, including sex, marital status, home ownership, education level, occupation, postal zone, and credit score. This change took effect on July 1, 2020, and aims to create a more equitable pricing structure for drivers.

It is important for Michigan drivers to understand these changes and how they may impact their insurance coverage and legal rights in the event of a car accident. The new No-Fault Law offers more flexibility in coverage options but also introduces complexities that drivers should carefully consider when making choices about their auto insurance.

Choosing a PIP coverage level

Personal Injury Protection (PIP) is mandatory for all Michigan drivers. It covers medical costs for the driver of the insured vehicle and their passengers, and can also pay a portion of lost wages and essential services. PIP can be used regardless of who is at fault in an accident.

Michigan drivers can now choose a PIP coverage level that suits their needs and budget. There are six PIP medical coverage levels available:

Unlimited coverage

This is the same as the old policies, where policyholders and their covered family members received unlimited allowable expenses for their care, recovery, and rehabilitation following a motor vehicle accident. This is the most comprehensive option, providing the most medical coverage and benefits. There is a mandatory 10% rate reduction in the cost of PIP coverage per vehicle.

Up to $500,000 in coverage

This means your auto insurance company must pay up to $500,000 in medical bills related to an auto accident. There is a mandatory rate reduction of 20% or greater per vehicle.

Up to $250,000 in coverage

This is usually the minimum amount of PIP coverage a person can purchase. There is a mandatory 35% rate reduction on average per vehicle.

Up to $50,000 in coverage - Medicaid beneficiary

This option is only available to those enrolled in Medicaid, and their spouse and resident relatives must also be on Medicaid, have other "qualified health coverage", or have PIP coverage through a different auto policy. This option has a mandatory rate reduction of 45% per vehicle. However, Medicaid does not pay for most car accident-related treatment, so this option may not provide adequate coverage.

Medicare opt-out

If you are covered by both Part A and Part B of Medicare, and your household members have their own coverage, you can opt out of PIP coverage altogether. However, this is not advisable as Medicare does not automatically pay for auto accident treatment and has limitations on the number of rehabilitation visits it will cover.

$250,000 PIP opt-out

This option is available to those with "qualified health coverage" that covers car accident-related injuries, and whose household members also have qualified health coverage. However, this is not available to most people as "qualified health coverage" must cover auto accident-related treatment with no limitations or exclusions, and most health insurance plans have some limitations.

If you do not choose a PIP medical option, the unlimited PIP medical option is selected by default.

Opting out of No-Fault medical coverage

As of July 1, 2020, Michigan drivers have the option to opt out of No-Fault medical coverage, also known as Personal Injury Protection (PIP) coverage. This is a significant change, as previously, all motor vehicle owners in Michigan were required to have unlimited lifetime PIP coverage.

Now, drivers can choose from different levels of PIP benefits, including:

• Unlimited coverage (same as the old system)
• $250,000 limit with PIP medical exclusion
• $50,000 limit (only for Medicaid recipients)
• $0 coverage (only for those enrolled in Medicare Parts A and B)

If you are enrolled in Medicare Parts A and B, you may opt out of PIP medical coverage entirely. However, to do so, your spouse and any resident relatives covered by your policy must have their own qualified health coverage (either private insurance or a different No-Fault policy with PIP) for car accident injuries.

It is important to note that opting out of PIP coverage carries financial risks. In the event of a car accident, you will need to rely on your health insurance or Medicare to cover your medical expenses. If these do not provide sufficient coverage, you could be left with significant out-of-pocket expenses.

Additionally, under the new No-Fault system, all owners and drivers are potentially responsible for higher damages than before. As a result, it is recommended that motorists select the highest level of coverage they can afford to protect their assets.

If you are considering opting out of No-Fault medical coverage in Michigan, be sure to carefully review the requirements and potential risks to make an informed decision.

Changes to attendant care

Michigan's auto insurance law has undergone some changes, including a new restriction on in-home, family-provided attendant care services. This change, which came into effect on July 2, 2021, means that auto insurance companies are only required to pay for 56 hours per week of in-home, family-provided attendant care services. This limitation does not apply to commercially-provided services or prohibit insurance companies from contracting to cover services beyond the 56-hour limitation.

Attendant care is a No-Fault PIP benefit that ensures car accident victims receive the nursing assistance they need to recover from their injuries. It covers assistance with activities of daily living, such as eating, dressing, and administering medication. It can be provided by a certified or registered nurse, a home health aide, or a family member of the victim.

The new restriction on in-home, family-provided attendant care services is a significant change from the previous law, which allowed family members to provide 24-hour care for their loved ones injured in automobile accidents. This change may have a substantial impact on the level of care and support available to car accident victims in Michigan.

If you have questions about receiving attendant care services after a car accident, it is recommended to seek legal advice or contact the Michigan Department of Insurance and Financial Services (DIFS) for guidance and support.

Increased bodily injury liability coverage

Michigan's new auto insurance law, which came into effect on July 1, 2020, has led to significant changes in the state's insurance landscape. One notable change is the increase in bodily injury liability coverage requirements. This type of insurance provides financial protection if a driver is at fault in an accident that causes injuries or death to another person.

Under the new law, the minimum bodily injury liability coverage limits have been raised. Drivers in Michigan are now required to carry bodily injury liability insurance with limits of at least $250,000 per person and $500,000 per accident if two or more people are injured. These limits are significantly higher than the previous minimum requirements of $20,000 per person and $40,000 per accident.

The increased bodily injury liability coverage ensures that at-fault drivers have sufficient financial protection in the event of a serious accident. It helps cover the costs associated with pain and suffering, excess medical benefits, lost wages, and other economic damages that the driver may be liable for. By having higher coverage limits, drivers can reduce their financial risk and provide better protection for themselves and their assets.

While the new law sets the minimum coverage requirements, drivers have the option to purchase even higher limits. Some insurance companies and experts recommend considering higher coverage amounts, such as $500,000 per person and $1,000,000 per accident. This additional coverage can provide an extra layer of financial protection, especially in accidents with multiple victims or severe injuries.

To make an informed decision about their coverage needs, drivers should carefully review their insurance policies and consult with a licensed insurance agent or advisor. It is important to understand the risks and potential financial implications associated with different coverage levels. By choosing adequate bodily injury liability coverage, drivers can ensure they are properly protected and reduce their financial exposure in the event of a catastrophic accident.

Frequently asked questions