Michigan Auto Insurance Laws: What's New?

Michigan's new auto insurance law, which came into effect on July 2, 2020, has brought about significant changes for drivers in the state. The new law eliminates the requirement for drivers to buy unlimited, lifetime medical coverage for car accident injuries, giving them more options for personal protection insurance (PIP) coverage. It also increases the minimum amount of bodily injury liability coverage that drivers must purchase and bans the use of certain personal information in insurance pricing. The law is intended to lower costs for Michigan drivers and strengthen consumer protections, but it remains to be seen if it will effectively reduce the high cost of car insurance in the state.

New PIP Coverage Options

Michigan's new auto insurance law gives drivers more options for personal injury protection (PIP) coverage. PIP covers medical bills from injuries sustained in an auto accident, as well as rehabilitation costs, lost wages, attendant care, and other expenses. While PIP has always been mandatory in Michigan, the new reform allows drivers to select a coverage level that is appropriate for their needs and budget.

Unlimited Coverage

This option provides coverage for medical bills and associated costs with no limit. It is the most expensive option but reduces your out-of-pocket expenses in the event of a claim.

$500,000 Limit

This option covers up to $500,000 per person per covered accident. It is likely cheaper than unlimited coverage, but any expenses over $500,000 will need to be paid by your health insurance or out of your own pocket.

$250,000 Limit

This option covers up to $250,000 per person per covered accident and may be cheaper than higher coverage limits. However, any expenses greater than $250,000 will need to be paid by your health insurance or out-of-pocket.

$250,000 Limit with Exclusions

This option covers up to $250,000 per person per covered accident, with the option to exclude some or all drivers on the policy if they have a health insurance policy that covers auto injuries with a deductible lower than $6,000. Policyholders will pay a lower premium due to the reduced coverage for excluded drivers.

$50,000 Limit

This option covers up to $50,000 per person per covered accident and is only available to drivers enrolled in Medicaid who meet additional eligibility requirements. All resident relatives must have and provide proof of Medicaid or qualified health coverage. This option is cheaper than higher coverage limits, but any expenses over $50,000 will be the responsibility of the driver's health insurer or need to be paid out-of-pocket.

No PIP Coverage (PIP Medical Opt-Out)

This option is only available to drivers who have Medicare Parts A and B and who meet additional eligibility requirements. All resident relatives must have another insurance policy, such as a health insurance policy, that covers car accident injuries.

It is important to note that these coverage options are per person, per accident, and that drivers may need to coordinate their car insurance with their health insurance coverage to ensure adequate protection.

Bodily Injury Coverage

Michigan's new auto insurance law, which came into effect on July 1, 2020, has brought about significant changes to the state's previous no-fault insurance system. One of the most notable changes pertains to bodily injury coverage, which is mandatory for all motorists in Michigan.

Mandatory Bodily Injury Coverage:

Under the new law, all motorists in Michigan are required to purchase a minimum amount of bodily injury coverage. This type of coverage protects the driver and owner of a motor vehicle if they are found negligent and cause injury or death to another person in an accident. The minimum coverage amounts have increased compared to the previous requirements. Motor vehicle owners must now purchase coverage of at least $250,000 per person and $500,000 per accident for bodily injuries. These amounts are significantly higher than the previous minimums of $20,000 per person and $40,000 per accident.

Lower Coverage Options:

While the new law sets higher minimums, motorists do have the option to choose lower coverage amounts. They can select coverage of $50,000 per person and $100,000 per accident for bodily injuries. However, to exercise this option, insurance companies will require motorists to sign a form approved by the Director of Insurance and Financial Services. It is important to note that choosing lower coverage amounts carries significant financial risk, especially since drivers and vehicle owners are now potentially liable for the medical bills of the person they injure in an accident.

Increased Liability and Risk:

The new auto insurance law in Michigan has also led to an increased level of liability and risk for all drivers and passengers. With the changes to the no-fault system, motorists are now potentially responsible for someone else's medical expenses following an accident. This means that they could be held liable for paying the injured person's medical bills, which could run into hundreds of thousands or even millions of dollars. As a result, it is advisable for motorists to select the highest coverage available to protect their assets, including their homes, vehicles, and savings.

Role of Insurance Companies:

Insurance companies are now required to provide drivers with forms that describe the benefits and risks associated with the various coverage options. These forms are designed to help drivers make informed decisions about their insurance needs. Additionally, insurance companies must offer premium reductions for certain coverage options under the new law. For example, the law mandates premium reductions of "an average of 20% or greater per vehicle" for the $500,000 PIP coverage option. However, it is important to note that these reductions apply only to the PIP portion of the insurance premium, and other portions of the premium may increase.

Uninsured Motorist Coverage

UM coverage is a valuable source of legal recovery for pain and suffering compensation and "excess" No-Fault Personal Injury Protection (PIP) medical benefits. It covers the economic losses and medical bills not covered by health insurance, as well as any pain and suffering that could have been claimed from the at-fault driver's insurance company if they had been properly insured.

When making a UM coverage claim, the injured person must show that the other driver was uninsured and at fault for the accident. It is important to comply with the notification requirements and deadlines specified in the UM insurance policy, as insurance companies can deny coverage if notice is not provided within the specified timeframe. UM coverage is not meant to pay for medical bills or treatment, but rather to compensate for pain and suffering and any excess economic losses.

While UM coverage is not mandatory in Michigan, it is highly recommended for all drivers due to the high number of uninsured drivers in the state. The recommended coverage limits are $500,000 per person and $1,000,000 per accident, and this coverage is relatively inexpensive.

Medical Billing Limits

Michigan's new auto insurance law has introduced significant changes to the state's Medical Billing Limits, offering drivers more choices and flexibility while also increasing their risk and liability. Here is a detailed overview of the new Medical Billing Limits:

Tiered PIP Coverage System:

The most notable change is the replacement of the mandatory comprehensive lifetime Personal Injury Protection (PIP) insurance coverage with a tiered system. This new system allows Michigan drivers to choose from different PIP coverage options, each with specific limits and corresponding premium reductions:

• No Limit PIP Option: This option provides unlimited coverage for reasonable expenses incurred for the care, recovery, and rehabilitation of the injured person. While it is similar to the previous mandatory coverage, insurance companies are mandated to reduce premiums by an average of 10% or more per vehicle.
• $500,000 PIP Option: This option provides coverage for up to $500,000 in expenses for the injured person's care, recovery, and rehabilitation. The new law mandates a premium reduction of 20% or more per vehicle.
• $250,000 PIP Option: This option covers up to $250,000 in expenses and offers a higher premium reduction of 35% or more per vehicle.
• $50,000 PIP Medicaid Option: Available to individuals on Medicaid, this option provides coverage of up to $50,000. It comes with the highest mandated premium reduction of 45% or greater per vehicle.
• Opt-Out Option: This option is for those who meet specific criteria, such as having qualifying health insurance policies or Medicare Parts A and B. With this option, individuals rely on their health insurance for auto accident injuries.

Bodily Injury Coverage:

Under the new law, there are increased minimum requirements for bodily injury coverage. All motor vehicle owners in Michigan must purchase higher coverage amounts: $250,000 per person and $500,000 per accident. Drivers can choose to reduce this coverage to $50,000 per person and $100,000 per accident by signing an approved form. However, opting for lower coverage can be financially risky, as drivers may now be liable for the medical bills of the person they injure.

Uninsured and Underinsured Motorist Coverage:

While not mandatory, Michigan motorists are strongly advised to purchase Uninsured Motorist and Underinsured Motorist Coverage. This coverage is crucial for protection in the event of an accident with a driver who has insufficient or no insurance.

Understanding "Savings" and Premium Reductions:

It is important to understand that the mandated savings and premium reductions mentioned above apply only to the PIP portion of the total insurance cost. The actual savings may be lower than expected, and insurance companies can still increase overall premiums through "re-rating." Additionally, the premium reductions are not guaranteed for each policyholder and may depend on individual circumstances and the chosen coverage options.

Managed Care and Coordination of Benefits Options:

Drivers can also choose a Managed Care Option, which may impose limitations on doctor and treatment choices. Additionally, the Coordination of Benefits Option allows for "deductibles and exclusions reasonably related to other health and accident coverage." This option has been altered by the new law, and the cost savings for coordinated policies may differ from the old law.

In conclusion, while Michigan's new auto insurance law offers more choices and potential savings, it is crucial for motorists to carefully consider their options and understand the financial implications of each choice, especially regarding Medical Billing Limits.

Stricter Insurance Regulation

Michigan has implemented stricter insurance regulation as part of its new auto insurance laws. The state previously followed a "file and use" system, which allowed insurers to implement new rates as soon as they were submitted to the state. While state regulators could reject these rates, it was a rare occurrence.

However, as of July 2, 2020, the state insurance regulator must approve new rates before insurers can start charging customers. This change is expected to strengthen government oversight of car insurance rates and prevent unexpected rate increases for consumers.

In addition to stricter regulation, the new laws also include other significant changes, such as new PIP coverage options, increased liability coverage requirements, a ban on using certain personal information in insurance pricing, and new limits on medical billing. These changes aim to reduce the high cost of car insurance in Michigan, which has been a long-standing issue for the state.

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