Michigan's New Auto Insurance Law: What You Need To Know

Michigan's new auto insurance law, which came into effect on July 2, 2020, introduced sweeping changes to the state's previous No-Fault law. The new legislation, signed by Governor Whitmer, aims to lower costs for Michigan drivers, maintain the highest coverage options in the country, and strengthen consumer protections. One of the most significant changes is the replacement of mandatory comprehensive lifetime no-fault personal injury protection (PIP) insurance coverage with a tiered system, offering drivers several coverage options ranging from $50,000 to $500,000, or even unlimited coverage. Additionally, the law increases the minimum required liability coverage and prohibits the use of certain personal factors in insurance pricing, such as gender, marital status, and education. The new auto insurance law in Michigan also introduces stricter insurance regulation, requiring state approval of new rates before insurers can charge customers. These changes are intended to reduce the high cost of car insurance in the state and provide Michigan drivers with more choices and lower-cost insurance options.

New PIP Coverage Options

Michigan's new auto insurance law has introduced a range of Personal Injury Protection (PIP) coverage options for drivers to choose from. This is a significant change from the previous mandatory comprehensive lifetime no-fault PIP insurance coverage. The new law, which came into effect on July 1, 2020, allows drivers to select a coverage level that suits their needs and budget. Here is an overview of the new PIP coverage options:

Option 1: No Limit PIP Option

This option is recommended and similar to the previous mandatory coverage. It provides unlimited coverage for all reasonable expenses incurred for the care, recovery, and rehabilitation of the injured person. The law mandates an average premium reduction of 10% or more per vehicle for this option. However, it's important to note that these reductions are not guaranteed for each policyholder and may only apply to the PIP portion of the premium.

Option 2: $500,000 PIP Option

This option provides coverage for up to $500,000 incurred for the injured person's care, recovery, and rehabilitation. The law mandates an average premium reduction of 20% or more per vehicle for this option. Similar to the previous option, these reductions may only apply to the PIP portion of the premium, and individual results may vary.

Option 3: $250,000 PIP Option

The $250,000 PIP option covers up to $250,000 incurred for the injured person's care, recovery, and rehabilitation. This option offers an average premium reduction of 35% or greater per vehicle. Again, it's important to remember that these reductions may not apply to the entire premium, and individual policies may differ.

Option 4: $50,000 PIP Medicaid Option (Limited Availability)

This option is specifically for individuals covered under Medicaid, with specific criteria for their spouse and household relatives regarding health insurance or other PIP coverage. It offers an average premium reduction of 45% or more per vehicle, but like the previous options, these savings may not be reflected in the total premium cost.

Option 5: Opt-Out (Limited Availability)

The final option is only available to those who meet certain criteria, including being a "qualified person" under Medicare Parts A and B or other specified health insurance policies. This option also comes with strict notification requirements if there are any changes to the health coverage of the policyholder or their household relatives.

It is important to note that while the new law offers potential savings, the actual savings may vary depending on individual circumstances and the chosen coverage option. Drivers are encouraged to carefully review the options, seek advice, and make informed decisions about their auto insurance coverage.

Bodily Injury Coverage

Michigan's new auto insurance law has brought about significant changes to the state's mandatory insurance requirements. One of the most notable changes is the increase in the minimum amount of bodily injury coverage that motorists must carry.

Previously, under the old No-Fault System, Michigan motorists were required to purchase bodily injury coverage of at least $20,000 per person and $40,000 per accident. These coverage limits, often referred to as 20/40 policies, were in place to protect drivers in the event that they were negligent and caused injuries or death to another person in a car accident.

However, as of July 1, 2020, the new auto insurance law raised the minimum bodily injury coverage requirements. Now, all motor vehicle owners in Michigan must purchase higher coverage amounts: $250,000 per person and $500,000 per accident. This change means that drivers will be able to cover more extensive medical bills and other expenses if they are found at fault in an accident that results in injuries or death.

It is important to note that drivers have the option to choose lower coverage limits, but it is not recommended. If a driver wishes to reduce their coverage, they can opt for $50,000 per person and $100,000 per accident. However, to make this election, motorists must sign a form approved by the Director of Insurance and Financial Services, acknowledging the financial risks associated with lower coverage.

The increase in minimum bodily injury coverage is a critical aspect of Michigan's new auto insurance law, as it provides greater protection for both the driver and anyone injured in an accident. With the potential for high medical costs and other expenses, having adequate bodily injury coverage can help prevent financial hardship in the event of a car crash.

In addition to the increased minimum coverage requirements, the new law also introduces a tiered system for personal injury protection (PIP) coverage, giving individuals more choices to opt out or select different coverage levels. These changes aim to provide Michigan drivers with more flexibility and lower-cost insurance options while still maintaining robust consumer protections.

Uninsured Motorist Coverage

If you have Uninsured Motorist Coverage and are injured in an accident caused by an uninsured driver, you will file a claim with your own insurance company, which will pay the compensation and money damages that would have been recovered from the at-fault driver's insurance company if they had been insured. Your insurance company will step into the shoes of the uninsured driver and pay for all personal injury damages that the uninsured driver would have been responsible for.

To collect benefits under an Uninsured Motorist policy, an injured person must show that the other driver was uninsured and that the uninsured driver was at fault for the car accident that resulted in their injuries. It is important to identify and comply with the notification requirements in your insurance policy, as many companies require notification of a car accident within a certain period of time, often within 30 to 90 days of the accident date. Failure to provide notification or providing it late could result in your claim being denied.

While there are no minimum amounts mandated in Michigan for Uninsured Motorist Coverage, it is recommended that drivers purchase as much coverage as they can afford to protect themselves and their families.

Medical Billing Limits

Michigan's new auto insurance law, which came into effect on July 1, 2020, introduced significant changes to the state's previous auto insurance system. One notable aspect of the new law is the introduction of a tiered system for personal injury protection (PIP) medical coverage, offering Michigan drivers more choices and lower-cost insurance options.

Under the previous law, Michigan motorists were required to purchase mandatory comprehensive lifetime no-fault PIP insurance coverage. However, with the new law, drivers now have the option to choose from different levels of PIP coverage:

• No Limit PIP Option: This option provides coverage for all reasonable expenses incurred for the care, recovery, and rehabilitation of the injured person. It is similar to the previous law's comprehensive lifetime coverage. While this option offers the most comprehensive protection, it may not result in significant premium reductions.
• $500,000 PIP Option: This option provides coverage for up to $500,000 for the injured person's care, recovery, and rehabilitation. It offers a higher level of protection while also mandating average premium reductions of 20% or greater per vehicle.
• $250,000 PIP Option: This option provides coverage for up to $250,000 for the injured person's care, recovery, and rehabilitation. It offers a balance between protection and cost savings, with average premium reductions of 35% or greater per vehicle.
• $50,000 PIP Medicaid Option: This option is specifically for individuals covered under Medicaid and their spouses and household relatives with similar coverage. It provides coverage for up to $50,000 and mandates average premium reductions of 45% or greater per vehicle.
• Opt-Out Option: This option is available only if the driver, their spouse, and household relatives meet certain criteria, such as being "qualified persons" under Medicare Parts A and B or other specific health insurance policies.

It is important to note that these premium reductions mandated by the new law apply only to the PIP portion of the insurance premium, and other portions of the premium may increase. Additionally, insurance companies are required to reduce their statewide average premium charges, but individual policyholders may not always benefit from these reductions.

The new auto insurance law in Michigan also made changes to bodily injury coverage. After July 1, 2020, motor vehicle owners are required to purchase higher minimum coverage amounts: $250,000 per person and $500,000 per accident. Drivers have the option 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, especially with the increased liability for medical expenses that drivers may cause in certain situations.

In addition to the changes in PIP and bodily injury coverage, the new auto insurance law in Michigan also addresses surprise or balance medical billing. Surprise billing occurs when a patient receives care from out-of-network providers, often in emergency situations, and is billed for amounts that their insurance company does not cover. To protect patients from these unexpected bills, Michigan enacted legislation that includes Enrolled House Bills 4459 and 4460. These bills establish limitations on out-of-network provider payments and require disclosures to patients related to the costs of services.

House Bill 4459 sets fee restrictions and limits on how much an out-of-network provider can collect in certain situations, such as emergency care, non-emergency care at a participating health facility, and specific circumstances where the patient does not have the option to choose an in-network provider.

House Bill 4460 mandates that out-of-network providers administering care to non-emergency patients must make certain disclosures, including informing patients that their health insurance may not cover all services, providing a good faith estimated cost of services, and notifying patients that they can choose to have the services performed by an in-network provider.

These changes to medical billing limits and protections in Michigan's new auto insurance law aim to provide drivers with more choices, lower costs, and enhanced consumer protections.

Stricter Insurance Regulation

Michigan has historically had the highest car insurance rates in the country. The average cost of car insurance in Michigan is $3,096 per year, which is 100% higher than the national average. In cities like Detroit, car insurance premiums can exceed $6,000 per year, accounting for more than 20% of residents' annual income.

One of the main reasons for the high cost of car insurance in Michigan is the state's previous requirement that all drivers purchase unlimited, lifetime medical coverage for car accident injuries. This coverage, known as Personal Injury Protection (PIP), provides many health and recovery benefits to injured drivers, including reimbursement for lost wages, in-home nursing care, and specialized medical treatments. While this made Michigan's car insurance coverage the best in the country for those injured in car crashes, it also led to costly medical claims, fraud, and legal battles among insurers, medical providers, and policyholders. As a result, insurance companies raised rates for all drivers, creating a significant economic burden for many Michiganders.

To address this issue, Michigan implemented a new auto insurance law in July 2020, which included stricter insurance regulation. Previously, Michigan followed a "file and use" system of insurance regulation, which allowed insurers to start using new rates as soon as they were submitted to the state. While state regulators could reject these rates, it was rare for them to do so.

Under the new law, 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 help control the high cost of car insurance in Michigan.

In addition to stricter insurance regulation, the new auto insurance law also introduced several other changes. These include new PIP coverage options, increased required liability coverage, a ban on using certain personal information in insurance pricing, and new limits on medical billing. These changes are designed to give drivers more flexibility in choosing their coverage levels, reduce the cost of car insurance, and improve government oversight of insurance rates.

While it is too early to tell the full impact of the new law, it is expected to bring much-needed relief to Michigan drivers who have been burdened with high car insurance rates for many years.

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