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Below, we've provided a summary of the changes that took effect July 2, 2020. However, we advise speaking with an agent to discuss how these law changes will impact you in the years to come.
Michigan Auto Reform 101
Change #1: Personal Injury Protection (PIP) Choice
PIP pays allowable expenses for medical, work loss, and replacement services if you or a resident relative are injured in an auto accident. Before the law changed, all Michigan auto policies were required to carry Unlimited PIP Medical coverage. You now have the following options for your PIP Medical limit:
- Unlimited (still an option, at a reduced price)
- $500,000
- $250,000
- If you have Medicaid, you may be eligible for $50,000
- If you have Qualified Health Coverage (QHC), you are eligible to opt-out
Change #2: Bodily Injury Liability and Expected Increase in Lawsuits
Liability coverage provides protection against a lawsuit resulting from an auto-related accident. The new law increased the minimum amount of required Bodily Injury Liability protection that must be carried on an auto policy.
- Old Limits: $20k per person/$40k per occurrence
- New Limits: $50k per person/$100k per occurrence
Additionally, the new law put in place a default limit of $250k per person/$500k per occurrence. Your liability limits will now automatically increase to this default limit at your annual policy renewal unless otherwise selected.
If your limits are currently higher than the new default limits, you will automatically renew with your current limits.
Increase in Lawsuits: Because drivers now have the choice to lower their PIP coverage, there will be more drivers with inadequate medical coverage. If you are in an auto accident with an underinsured individual, they could sue you for their balance or lack of coverage in medical expenses. Adequate liability coverage would be needed to protect you. Before the law change, everyone had unlimited PIP coverage and there was no reason to sue.
Change #3: Order of Priority
If an auto accident occurs, your carrier looks to see what policy or policies have PIP coverage that applies for those who have sustained injuries. There is a set priority for which policy must respond. Your carrier won’t look to the next policy in the priority order because PIP benefits don’t “stack.”
The new law changed the order for which policy takes priority and is responsible to pay for claims.
- Old Order of Priority:
- Your Policy
- Your Spouse’s Policy
- Resident Relative’s Policy
- Owner of the Vehicle’s Policy
- Operator of the Vehicle’s Policy
- Michigan Assigned Claims Plan (MACP)
- New Order of Priority:
- Your Policy
- Your Spouse’s Policy
- Resident Relative’s Policy
- Michigan Assigned Claims Plan (MACP) - $250,000 limit (effective July 2, 2020)
This new order could lead to significant gaps in coverage.
How does this affect my wallet?
If you choose to lower your PIP coverage, you will pay less in premiums. The average reductions are:
- Unlimited in coverage - 10% reduction
- $500,000 in coverage - 20% reduction
- $250,000 in coverage - 35% reduction
- $50,000 in coverage - 45% reduction
- Individuals with Medicare or Qualified Health Coverage could opt out and receive a 100% rate reduction on certain portions of PIP, depending on their individual circumstances
Lower Michigan Catastrophic Claims Association (MCCA) Fee: Before, there was a $220 MCCA fee per car, per year included in your premium cost. The new law has decreased this fee to $100 for unlimited coverage and $0 for any coverage below unlimited.
Increase in Lawsuits: Michigan will likely see an increase in auto accident related lawsuits. With more individuals on the road with inadequate PIP coverage, there is a higher chance you get sued for medical expenses due to an auto accident. You would need adequate Bodily Injury Liability protection to cover this and protect your assets.
Order of Priority: The new law removed both the Owner of the Vehicle and the Operator of the Vehicle from consideration. So even if the Owner or Operator of the vehicle involved in an accident has an insurance policy, it does not apply and will never be responsible for paying for your PIP Medical claim. Additionally, the MACP will only pay up to $250,000 if the claim falls to them in the priority, where previously the amount of medical coverage was unlimited.
