Michigan No-Fault Reform
New Michigan no-fault accident insurance legislation went into effect July 2, 2020.
Here are six things to know about the new law and its impact on consumers, agents, an insurers.
Michigan’s new no-fault insurance law, passed in spring 2019, goes went into effect July 2, 2020. The impact of these changes is far reaching, from consumers and auto insurers to commercial carriers, health care insurers and lawyers.
Before we get into the specific changes, let’s take a quick look on how we got here. The beginning of no-fault insurance was in the early 1970s. It was an attempt to simplify filing claims, compensate accident victims failry and in a timely fashion, and limit the number of lawsuits from auto accidents. As a result of no-fault auto insurance, however, Michigan drivers find themselves paying some of the nation’s highest insurance premiums. This is largely due to the unlimited lifetime personal injury protection (PIP) coverage legally required on the Michigan auto policy. These high PIP premiums have also led to Michigan having one of the highest rates of uninsured motorists in the country.
The new Michigan no-fault reform claims to maximize coverage while providing relief in the form of lower rates and five PIP coverage options to policyholders.
The law went into effect for all policies renewing after July 1, 2020; any accidents incurred prior to July 1, 2020, would still be subject to the old law and have unlimited benefits. If you currently receive payments from your auto policy as a result of an injury from an auto accident, you will continue to receive unlimited benefits regardless of which coverage option you elect in the future.
Here are six things you need to know:
1. Don’t believe what the media tells you.
They rarely get it 100% correct and often get it mostly wrong. Contact your agent and read what the State says. You can go to the Michigan Department of Insurance and Financial Services (DIFS) and review the changes here: https://www.michigan.gov/difs/0,5269,7-303-12902_93639—,00.html
2. New PIP coverage options and the legally required average rate reductions (guaranteed reduction for the next eight years)
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Unlimited — Full coverage. What you had before the reform.
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$500,000 — Slight savings for less coverage
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$250,000 — Less coverage, more savings
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$50,000 — Available if the named insured is enrolled in Medicaid and their household members have another auto insurance policy, Medicaid or other health insurance that will cover auto accident injuries.
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No coverage — Required to be covered under Medicare Parts A and Any other household members must have another auto insurance policy or health insurance that will cover auto accident injuries. (100% rate reduction)
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Average premium reductions:
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100% PIP rate reduction for NO Pip Coverage
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An average 45% or greater reduction per vehicle for the $50,000 PIP option
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An average 35% or greater reduction per vehicle for the $250,000 PIP option
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An average 20% or greater reduction per vehicle for the $500,000 PIP option
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An average 10% or greater reduction per vehicle for the unlimited PIP option