AUTO INSURANCE NO-FAULT REFORM FAQ

For more than 40 years, Michigan drivers have been forced to purchase unlimited, lifetime Personal Injury Protection (PIP) medical benefits with their auto insurance policy. This expensive mandate, coupled with a lack of cost controls over medical charges, caused auto insurance premiums to skyrocket over the years, landing Michigan in the top spot for the most expensive car insurance in the nation five years straight.

 

Beginning July 2, 2020, all of that will change when the state’s new auto no-fault law takes effect.

 

The law will give consumers what they have been clamoring for: a choice in their level of medical coverage. The law will also rein in dramatic overcharging by medical providers, who have been charging three to four times as much for medical procedures when treating car accident related injuries. Finally, the law will crack down on fraud and abuse, which costs the average family hundreds of dollars a year in additional premiums.

Here’s what you need to know about the new law and what it means for you:

What kind of savings can consumers expect from the new auto no-fault law?


Under the new law, auto insurance companies are required to lower PIP premiums for eight years depending on the level of coverage purchased:

  • Drivers who choose to opt-out of PIP coverage will receive a 100% reduction.
  • Drivers who choose $50,000 in PIP coverage will receive a 45% reduction, on average
  • Drivers who choose $250,000 in PIP coverage will receive a 35% reduction, on average
  • Drivers who choose $500,000 in PIP coverage will receive a 20% reduction, on average
  • Drivers who keep unlimited PIP coverage will receive a 10% reduction, on average
Savings will vary from company to company and driver to driver. It’s best to contact your auto insurance company or local insurance agent to review your coverage options and how they may affect your premium.




What will my medical coverage options be under the new auto no-fault law?


Drivers will be able to choose from several different levels of PIP coverage, allowing them to pick a plan that works best for them and their families. Those plans include:

  • PIP opt-out for those with Medicare, or separate health insurance, that covers auto accident-related injuries
  • $50,000 in PIP coverage for those on Medicaid
  • $250,000 in PIP coverage
  • $500,000 in PIP coverage
  • Unlimited lifetime PIP coverage
It’s important to note that, aside from the PIP opt-out, required medical coverage under the new auto no-fault law is still as much as — or greater — than any other state in the country.




What happens if I get hurt in a car accident and my medical care costs more than the coverage I chose?


If the cost of medical care exceeds what is covered by your auto insurance policy, your employer’s health care plan, Medicaid or Medicare may begin covering the cost of medical care. Those with higher medical costs can also seek damages from an at-fault driver’s insurance policy.




The new auto no-fault law increases the required bodily injury liability coverage to the highest in the nation. What is it and will the increase impact my auto insurance premium?


​​​​​​Bodily injury liability insurance covers claims made against drivers for injuries to others if they are at fault in an auto accident. Under the new auto no-fault law, auto insurance policies are required to provide bodily injury liability insurance coverage of not less than $250,000 per-person and up to $500,000 per-accident, although drivers can affirmatively choose a minimum of $50,000 per person and $100,0000 per accident. This is an increase from the currently required $20,000 per-person and $40,000 per-accident. It’s unclear how these required increases in coverage will impact auto insurance premiums.




Can I get a short-term policy if my auto insurance renewal is up before July 2?


​​​​​Generally, auto insurance companies do not offer short-term policies of less than 30 days. However, companies allow customers to make changes to their policy at any time.

If your auto insurance is renewed before July 2, contact your insurance company or local agent on or after July 2 to discuss options for your policy.




The Legislature passed auto no-fault reform last year, so why hasn’t my auto insurance premium gone down yet?


While the new law was passed in the spring of 2019, most of the significant reforms don’t go into effect until July 2020. Additionally, the medical fee schedule, which will bring even more cost reductions, doesn’t take effect until July 2021.




What can I be doing now?


  1. Reach out to your insurance company or local insurance agent to discuss the new coverage options that will soon be available to you.
  2. Review your health insurance plan and ask your employer if they will be covering medical care for car accident injuries as part of your health insurance plan.
IAM member companies and their agents are there to answer the call – day or night – to field your questions and help you find a plan that works for your family and budget.





For more information, click on any of the logos below to find out what the Department of Insurance and Financial Services and IAM members are saying about the new auto no-fault law:

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