Michigan Auto Insurance Reform FAQs

Today, Michigan drivers are required by law to have a No-Fault automobile insurance policy that includes Personal Injury Protection (PIP) benefits. While several states in the U.S. also have No-Fault requirements, Michigan’s No-Fault law is unique in that the PIP coverage provides for unlimited medical benefits for the lifetime of the injured person when those injuries result from an auto accident. On July 2, 2020, many changes to the existing no-fault auto insurance law will take effect, including giving Michigan drivers a choice in their level of PIP coverage. Under the new plan, drivers will be able to choose from up to six options for Personal Injury Protection coverage.

Since 1973, all Michigan automobile insurance policies have had to provide unlimited Personal Injury Protection benefits. If you qualified for PIP benefits because you were injured in an automobile accident, you could get lifetime medical benefits for treatment related to your care, recovery or rehabilitation. It sounded like a great idea at the time — but as health care costs and the frequency of lawsuits continued to rise, it meant that auto insurance costs rose significantly, too. Today, Michigan has the 4^th most expensive auto insurance in the country.¹ Unsurprisingly, it is also ranked 4^th in the U.S. with about 20% of drivers uninsured.²

While some parts of the law are already active, the parts that impact your selection options for PIP coverage go into effect on July 2, 2020. You don’t have to do anything until you renew your policy, but in order to make the transition easy for you and your family, you can make your new selections in advance of your renewal date.

The short answer is that it means you have a choice to make. When you renew your policy after July 2, 2020, you can keep your unlimited Personal Injury Protection Allowable Expenses (PIP AE) coverage limit, which is the same coverage you have today.

But if you choose a PIP AE option with less than unlimited coverage — or the $250,000 PIP Exclusion⁶ — you may want to factor in your own personal risk tolerance and financial situation. For example, what happens if you’re severely injured in an accident and your medical bills exceed your new coverage limit? Do you have enough health insurance to cover those bills? If you can’t work, do you have disability coverage available? If you get sued for the accident, do you have savings or other assets that could be at risk?

These are all things you’ll need to think about. The good news is our agents are here to help provide you information.

Once the new coverage options go into effect on July 2, 2020, you won’t need to take any action until it’s time to renew your policy. In the meantime, here are some steps you can take to prepare:

• Review your policy: The new law impacts your Personal Injury Protection Allowable Expenses (PIP AE) coverage, but that’s just one of the coverages included in your auto insurance policy. Make sure you’re familiar with all your coverages and your current limits. That’ll help when it comes time to renew and choose your PIP AE limit.
• Consider your assets: When you make changes to your policy limits, there’s more to think about than how much it costs. Lower coverage limits could expose you to medical bills or lawsuits. If you have savings accounts, a 401k, a home or other valuable assets, they could be at risk.
• Talk to your family: If you have a spouse or children, you’re not the only one impacted by these changes. Discuss your plans with your family so everyone understands your coverage moving forward.
• Reach out to your agent: If you still have questions, your agent will be more than happy to help.

Personal Injury Protection (PIP) helps cover expenses that arise as a result of injuries sustained in an auto accident. In Michigan, PIP covers these expenses regardless of who caused the accident or who is at fault.

The main coverage provided by PIP is for “allowable expenses,” also known as PIP AE. Allowable expenses are “reasonable charges incurred for reasonably necessary products, services and accommodations for an injured person’s care, recovery or rehabilitation.” This includes services like medical expenses, attendant care and nursing. Today in Michigan, your PIP AE coverage is unlimited. That means all of your medical costs are paid for — for as long as they’re necessary for your care, recovery or rehabilitation.

Starting July 2, 2020, when you renew your auto insurance policy, you’ll need to make a decision on your PIP AE coverage limit.³ Your choices will be:

OPTIONS AVAILABLE TO EVERYONE

• Unlimited⁴: This is the level you have right now
• $500,000 limit
• $250,000 limit

LOWER COST OPTIONS AVAILABLE IF YOU HAVE QUALIFIED HEALTH COVERAGE, MEDICAID OR MEDICARE

• $250,000 limit with PIP exclusion⁵ (Based on The Auto Club Group’s intended product offerings, individuals who purchase this option will not be eligible for any PIP allowable expenses.)
• $50,000 limit: Medicaid only⁶
• Allowable Expenses Opt-out: Medicare only⁷

When the time comes to renew your policy, AAA and your AAA agent can help provide you information.

Traditionally, a person’s healthcare insurance coverage is there to help pay medical expenses such as doctor visits or hospital stays. In Michigan, for the past few decades, auto insurance policies were required to have unlimited Personal Injury Protection (PIP) coverage. That meant if a driver was hurt as a result of an auto accident, the cost of care, rehabilitation and recovery was covered under PIP Allowable Expenses — and the coverage was essentially unlimited. With the new auto insurance reform law going into effect in July, unlimited personal injury protection coverage is no longer required. While this new option will help reduce the cost of auto insurance for many who choose lower levels of PIP Allowable Expenses coverage, it also means that drivers may need to rely more on their personal healthcare insurance coverage if they’re hurt in an accident.

Qualified Health Coverage includes individual or employer-sponsored plans that fully cover auto-related injuries and have a deductible of $6,000 or less per person. You or members of your household who have Qualified Health Coverage may select an exclusion for PIP Allowable Expenses coverage. Check with your health insurance provider to see if your plan is eligible.

Medicare Parts A & B coverage also allows you to opt out of PIP Allowable Expenses but has additional eligibility criteria that applies to all other members of your household, while Medicaid coverage allows you to choose a special, low-cost, $50k coverage option. See the “What are my Personal Injury Protection coverage options” FAQ for more details.

There are some risks to consider with the new, lower Personal Injury Protection Allowable Expenses coverage options. The benefits offered for auto accident injuries under most healthcare insurance plans are not the same as PIP benefits. Some of the major risks include:

• Not having enough coverage, and in particular, in the event of a catastrophic auto injury.
• Unlike auto insurance, health insurance may stop paying when the policy ends or is cancelled.

One way to address these risks is to discuss your coverage with your healthcare insurance provider. You can also discuss the options available for you to select with your agent.

Before choosing new PIP Allowable Expenses (PIP AE) coverage limits, it’s important to ask your healthcare insurer the following questions:

• Do I have Qualified Health Coverage? Does my health plan restrict or limit auto injury coverage? What is my individual deductible? If I want to exclude PIP AE coverage under $250,000 option, my health insurance provider may need to provide proof of eligibility.
• How much coverage does my health insurance provide for injuries sustained in auto-related accidents?
• If I am catastrophically injured in a car accident, does my health plan cover attendant care? Most health plans may not cover attendant care coverage.

That depends. PIP Allowable Expenses (PIP AE) coverage is typically broader and more comprehensive than most health insurance plans for injuries sustained in an auto accident. PIP AE provides for medical expenses, attendant care, replacement services, and other benefits. Of course, there are many healthcare plans with many different coverage options. So, it’s important to speak to your auto insurance and health insurance providers for specific details on what’s covered, and what’s not, before choosing a new level of PIP AE coverage.

Today, every driver in Michigan is required to have unlimited Personal Injury Protection Allowable Expenses (PIP AE) coverage on their policy. When part of Michigan’s new auto insurance reform law takes effect on July 2, 2020, you’ll be able to choose from different levels of PIP AE coverage.³ Depending on the specific coverage levels you choose, you may pay less for PIP AE coverage.

OPTIONS AVAILABLE TO EVERYONE

• Unlimited⁴: 10% average savings
• $500,000 limit: 20% average savings
• $250,000 limit: 35% average savings

LOWER COST OPTIONS AVAILABLE IF YOU HAVE QUALIFIED HEALTH COVERAGE, MEDICAID OR MEDICARE

• $250,000 limit with PIP exclusion⁵ - Based on The Auto Club Group’s intended product offerings, individuals who purchase this option will not be eligible for any PIP allowable expenses: 100% average savings
• $50,000 limit (Medicaid only⁶): 45% average savings
• Allowable Expenses Opt-out (Medicare only⁷): up to 100% average savings

If you decide to reduce your PIP AE coverage, you may want to weigh other coverage levels on your policy, like your Bodily Injury coverage limits, so you select limits to help meet your needs.

In Michigan, Bodily Injury coverage pays when you are responsible for seriously hurting or causing the death of another driver, passenger or pedestrian in an auto accident. It can help pay for medical expenses, lost wages, and legal and funeral expenses. It also includes some damages not covered by Personal Injury Protection (PIP) coverage, often referred to as pain and suffering.

No-fault personal injury protection (PIP) pays for your treatment when you’re injured in an accident no matter who’s at fault. Bodily injury coverage helps to protect you when you’re responsible for an accident that seriously hurts or results in the death of someone else.

If your coverage increases, your cost will most likely increase, too. BI coverage limits are going up. The minimum coverage will now be $50k per person/$100k per accident. However, the new default coverage is $250k/$500k. In fact, if you opt to choose coverage lower than the default, you’ll have to fill out a form that says you know the risks that come with choosing lower levels of BI coverage.

BI coverage only protects you up to the limits you choose. So, if you’re thinking about choosing a lower level of Bodily Injury coverage, it’s important you know the potential financial risks.

If you’re responsible for an auto accident that hurt someone or results in a person’s death, and the costs are higher than your coverage limit, you’ll need to pay the difference. If you can’t:

• Your assets may be seized (including pensions) or a lien may be placed on your home.
• Your wages may be garnished.
• Your driver’s license may be suspended.

If you have assets, including a home or pension, that add up to more than the default bodily injury coverage limit of $50k/100k, you should consider choosing a higher limit.

Every auto insurance policy AAA issues or renews after July 1, 2020, will start at the new default BI coverage level of $250k per person/$500k per accident. If your current coverage is already higher than the state defaults, then your policy will renew at its current limits. However, you can choose more coverage if you’d like, or you can add an umbrella policy for additional protection.

For most of our current policyholders, this will mean an increased BI premium. But the projected decreases in Personal Injury Protection (PIP) premiums should make up for that. As always, talk to your agent. They’re there to help provide information to you so you can make the decision that’s best for your situation.

*Please see the No-Fault Act for complete details. This summary is being provided for general information purposes only. Subject to regulatory approval. Discounts and savings opportunities subject to eligibility requirements. Coverage is subject to eligibility terms, conditions, exclusions and limitations. Subject to underwriting eligibility requirements. Insurance underwritten by Auto Club Insurance Association, Auto Club Group Insurance Company, MemberSelect Insurance Company or non-affiliated insurance companies.