Understanding PIP Reform and Selecting the Best Option
Last fall Governor Whitmer signed bipartisan no-fault auto legislation known as “PIP reform” or “No Fault Reform”, which will go into effect on July 1, 2020. The goal of this legislation is to reduce premiums for Michigan drivers while maintaining the highest coverage options in the country. The legislation was intended to create a better no-fault system for drivers.
While this legislation was intended to benefit Michigan drivers, it has some unintended consequences including increased liability exposures for Michigan drivers. The previous No-Fault system (established in 1978) ensured that nearly every victim involved in an accident would have unlimited Personal Injury Protection (medical coverage). The new legislation does not provide those same guarantees.
The new system will allow drivers to select various options of PIP coverage as follows:
Unlimited PIP coverage
$500,000 limit
$250,000 limit
$50,000 limit; this is the lowest limit available, but only for drivers who are on Medicaid. (Your spouse and other relatives who live with you may be on Medicaid or have other qualified health coverage.)
Opt-out of PIP coverage entirely; however, you, your spouse and all relatives who live with you must have Medicare or qualified health insurance to be eligible.
While it might be tempting to choose a reduced PIP limit to save money you will be leaving you and your family at risk in the event of an auto accident. Also, our research indicates that the savings in choosing are not as substantial as you might expect. It is also important to be aware of the numerous situations in which an operator or victim may not be covered by PIP or will not have enough PIP and will end up without sufficient medical coverage. These scenarios include:
Children or dependents living away from home but operating your vehicle. This could include individuals listed as drivers on your policy.
Children who live in a split custody situation as a result of divorce or separation.
Drivers with Medicare that have waived PIP coverage.
Motorcycle operators
A live-in partner that doesn’t have an auto policy of their own.
As a result of these potential coverage issues, we believe that more drivers will find themselves without sufficient medical coverage and will be seeking compensation through litigation.
Worgess Agency Inc is providing the following coverage recommendations:
We strongly recommend every policyholder to elect the “unlimited” option for PIP coverage. Even by maintaining unlimited benefits your PIP premiums will still reduce by 10% and your MCCA fees will decrease from $220 to $100 per vehicle.
We advise that every policyholder maintain a minimum of at least $500,000 ($510,000?) for the combined single limit of liability coverage. This will provide more protection from underinsured drivers suing you for coverage.
We strongly encourage every policyholder to carry an umbrella policy of at least $1,000,000
Please contact our agency to discuss your individual needs.
Frequently asked questions
What is Michigan no-fault insurance reform?
No fault auto insurance reform is new legislation that will take effect July 1st 2020. It will affect every auto insurance driver in the state of Michigan (that includes policyholders, drivers, and accident victims). Instead of providing unlimited coverage as we have been accustomed to since 1978, the legislation will allow drivers to select from several options for Personal Injury Protection (PIP).
When does it take effect?
The bill will become effective on July 1, 2020. If you buy a new policy on or after that date the new rules will apply to you. If you already have a policy, you won’t have to change until your policy renews. However, some insurance companies may offer the opportunity to make the change earlier.
What do I have to do?
There are forms you will need to review and sign whether you want to make changes to your insurance coverages or not. Your insurance carrier will send those forms to you. If you need help filling out the forms, contact your Worgess agent. That’s why we’re here. *
You should also contact your Worgess agent if:
You have drivers on your policy who do not live within your residence
You have children in a split custody situation
You have Medicare
You own or operate a motorcycle
You have a roommate or live-in partner that does not maintain their own policy
* Now more than ever it’s especially important to read the mail and emails you receive from your insurance carriers, and to complete the tasks they ask you to complete. Not doing so could result in changes that impact your rates.
How will my coverage change?
Before, you were required to take unlimited medical coverage to pay for your expenses if you were injured in a car accident. Now you can choose your amount of coverage from the options below. It can be confusing, so please don’t hesitate to connect with your Worgess agent if you want or need advice.
The new system will allow drivers to select various options of PIP coverage as follows:
Unlimited PIP coverage
$500,000 limit
$250,000 limit
$50,000 limit; this is the lowest limit available, but only for drivers who are on Medicaid. (Your spouse and other relatives who live with you may be on Medicaid or have other qualified health coverage.)
Opt-out of PIP coverage entirely; however, you, your spouse and all relatives who live with you must have Medicare or qualified health insurance to be eligible
Will I save money?
Probably. It all depends on the amount of coverage you choose and other factors. We can help you explore your options.
What else has changed?
Among other things, your Personal Injury Protection — a.k.a. PIP — coverage now applies to the policy owner, their spouse and resident relatives. Others who were previously covered now need to have separate coverage. These include:
Drivers on your policy or operating your vehicle that don’t live within your residence
Children, in a split custody situation
Motorcycle Operators could be effected
Roommates or live-in partners that do not maintain their own policy
Are there drawbacks to Michigan no-fault auto insurance reform?
The cost of liability may increase. If you do get in an accident, you may have to cover the costs your insurance company doesn’t. Some drivers might have to get their own policies. The likelihood of you getting sued for by the victim of an accident could increase.
What will Worgess do for me?
We’ll keep you updated with general information and resources and we are happy to provide one-on-one consultation and advice. We can discuss your specific situation and evaluate your needs. We’re here to take care of you. It’s what we love to do.
What if I have more questions?
That’s completely understandable. You may not even know what those questions are — just that you have them! We’ve got your back. Connect with your Worgess agent and ask about Michigan no-fault auto insurance reform.
