Michigan’s No-Fault Insurance Law changed drastically on July 1, 2020. For the first time since I was a 6-year old boy, unlimited, lifetime medical coverage is no longer mandatory. This is the biggest (of many) changes in the new law.
When your policy renews, you now have a significant decision to make: to select your Personal Injury Protection (PIP) coverage. Your options are listed below:
Option 1 – NO LIMIT PIP OPTION – RECOMMENDED
This is the closest option to what we have had since 1973 and is available to anyone purchasing No-Fault Insurance. This option covers all reasonable expenses incurred for the care, recovery and rehabilitation of the injured person. It is exactly what it says it is; unlimited, lifetime coverage. The new law mandates premium reductions to be an average of 10% or greater per vehicle. Reductions are not guaranteed for everyone, and only apply to the PIP portion of your policy. Other portions of your premium may actually increase.
Option 2 – $500,000 PIP OPTION
This option is also available to anyone purchasing No-Fault Insurance. This option only covers up to $500,000 incurred for the injured person’s care, recovery and rehabilitation. The reduction of the PIP portion of your premium is to be an average of 20% or greater per vehicle with this option. Reductions are not guaranteed for everyone, and only apply to the PIP portion of your policy. Other portions of your premium may actually increase.
Option 3 – $250,000 PIP OPTION
This option is also available to anyone purchasing No-Fault Insurance. This option only covers up to $250,000 incurred for the injured person’s care, recovery and rehabilitation. The reduction of the PIP portion of your premium is to be an average of 35% or greater per vehicle with this option. Reductions are not guaranteed for everyone, and only apply to the PIP portion of your policy. Other portions of your premium may actually increase.
Option 4 – $50,000 PIP MEDICAID OPTION (LIMITED AVAILABILITY)
This option is only available to persons covered under Medicaid and whose spouse and household relatives are also either on Medicaid, have other health insurance or have other PIP coverage through another policy. The reduction of the PIP portion of your premium is to be an average of 55% or greater per vehicle with this option. Reductions are not guaranteed for everyone, and only apply to the PIP portion of your policy. Other portions of your premium may actually increase.
Option 5 – OPT OUT (LIMITED AVAILABILITY)
This option is only available if you and your spouse and household relatives meet certain criteria including that you and household relatives are “qualified persons” under either Medicare Parts A and B or other qualifying health insurance policies narrowly defined in the No-Fault Act. If you select this option, you will have very strict notification requirements if you or any of your household relatives ever lose qualified health coverage.
I have had several people tell me they are going to rely on their health insurance or their Medicaid or Medicare. Please don’t! If you are involved in a car accident and suffer serious or catastrophic injuries, you want all the benefits your unlimited, lifetime medical benefits provide! If your treatment and medical bills exceed your elected limits, how will you pay for this excess treatment? Will you be able to receive the treatment you need if you can’t pay for it? Will your health insurance cover it? If you get your health insurance through your employer, and you lose your job, then what? Or what about the high deductible and co-pays with your health insurance? Do you want to choose your doctors and facilities? There are no restrictions on those choices with your auto insurance, however, there often are with health insurance. What if you don’t have private health insurance? Then you must look to Medicaid, Medicare or paying out-of-pocket which would bankrupt many of us.
Relying on private health insurance, Medicaid or Medicare isn’t ideal. For example, many health insurance policies limit physical therapy to a certain number of sessions or weeks. What happens when you run out of those therapy sessions? What if your injuries require you to be placed in a residential facility? You would much rather be in a facility of your choosing, as opposed to Medicaid or Medicare’s choice! What if you require attendant care, and have a spouse, other family member or friend provide that service for you? Unlimited, lifetime medical is the right choice.
Talk to your agent and make an educated decision, because the savings may not be that great. Remember, the mandated savings for each of the coverage options do not apply to the entire policy, but only to the PIP option which makes up roughly 45% of your total premium. To give you an idea of what to expect, if you paid $2,000 last year for your auto insurance and this year you choose the $500,000 cap option, your savings will be roughly $180.00. For that minimal savings, you are simply taking on too much of a risk.
Another significant element of the No-Fault law is an increase in the minimum bodily injury limit that you must carry on your vehicle in case you injure someone else. Prior to July of 2020, the minimum liability insurance you had to have on your vehicle was $20,000 per person and $40,000 per occurrence (commonly known as a 20/40 policy). Effective July 1, 2020, the new minimum increased to $250,000 per person and $500,000 per occurrence. There is actually an option to reduce that liability coverage to only $50,000/$100,000 but you must complete additional paperwork with your agent. The paperwork is required because making this election for lower coverage is very financially risky. Let me tell you why….
Before 2020, someone who was negligent (ran a red light, rear-ended someone, failed to yield….) and injured someone could only be sued for “pain and suffering” and limited economic damages. The negligent driver could not be sued for the injured person’s medical expenses, because everyone injured in an auto accident (including pedestrians, bicyclists…) was entitled to unlimited, lifetime medical from No-Fault. But now with the current limits, if someone elects a cap, all medical expenses above that cap can now be included in a claim or lawsuit against the driver at fault! So, if you cause a car accident and injure someone who elected the $250,000 maximum, and they incur $500,000 in medical bills, you can now be sued for the excess, uncovered $250,000 in medical expenses in addition to pain and suffering!
For this reason, besides keeping the unlimited, lifetime medical as explained above, I also recommend maintaining at least $500,000 per person and 1M per occurrence in liability coverage. Umbrella policies are worth a look also!
You probably have more questions now than before you started reading this. If you do, please give me a call to discuss what’s best for you!
