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Michigan’s No-Fault Insurance: What Does it Cover and What Options Do You Have?

Auto insurance costs have steadily increased in the U.S. over the past decade and no other state has felt the impact like here in Michigan – we pay the highest car insurance rates in the country. That will soon change when the new insurance laws go into effect on July 1, 2020. 

The new law makes major changes and, significantly, it eliminates the state’s requirement that all drivers buy unlimited, lifetime injury coverage for people hurt in car accidents. But what does this mean?

When two Michigan-insured drivers get into a car accident, the no-fault laws tell them to file a claim with their own insurance companies first.  Every Michigan no-fault insurance policy is required to offer Personal Injury Protection, or PIP, which pays most or all of the insured’s injury-related costs, depending on the policy you choose and keep. These include:

  • all of the medical care costs related to the accident
  • up to 85 percent of any wages lost due to the injury, for up to three years, and
  • up to $20 per day for someone to take care of chores at home that the injured person can no longer do — like cooking, cleaning, child care, and yard work.

These benefits, however, are capped at $4,929 per month.  Therefore, if your medical costs are particularly high or you had a high-paying job before your accident, your insurance company may not be required to pay every dime you’ve lost, if some of that money would push your monthly benefits above the $4,929 limit.

No-fault insurance also covers up to $1,000,000 in property damage.  This is damage to a car, house, fence, or other personal or real property.  A minimum policy also offers at least $10,000 in coverage for damage to property that is not located in Michigan.

Finally, no-fault insurance covers “residual liability,” which refers to costs that come up when you’re in an accident with a non-Michigan driver, an uninsured driver, or an accident in another state.  It also offers coverage for costs if another driver sues you due to an accident.

Michigan no-fault insurance is not required to cover the following:

  • repairs to your vehicle if it is hit by another vehicle (collision) or an object or animal (comprehensive);
  • all medical expenses, depending on the policy paid for and kept.

When selecting PIP coverage, there are five options created by lawmakers that allow drivers to keep unlimited PIP or choose less coverage for greater discounts. The law requires insurance providers to reduce the cost of (only) the PIP portion of car insurance by the following amounts until July 1, 2028. 

Choosing a lower coverage limit can reduce the cost of your insurance — but if you’re in an accident, your medical expenses will be paid only up to the limit you choose

  1. Unlimited PIP coverage (10% reduction) Covers unlimited, lifetime car accident injury expenses. Drivers concerned about maintaining their current level of car injury coverage should keep this option. 
  2. $500,000 of PIP coverage (20% reduction) Covers car accident injury expenses up to $500,000.
  3. $250,000 of PIP coverage (35% reduction) Covers car accident injury expenses up to $250,000.
  4. $50,000 of PIP coverage (45% reduction) Covers car accident injury expenses up to $50,000. This is the lowest option available for Medicaid recipients. 
  5. Opt out of PIP coverage (100% reduction) Drivers can opt out of PIP coverage completely only if they have Medicare or a qualifying health insurance plan that covers car accident injuries.

The goal behind the new no-fault law is to reduce the number of cases presented in small claims court, which can delay and slow down the reimbursement for the injured and affected parties.

Drivers who choose to keep unlimited PIP coverage will see approximately 10% in savings, while those who opt in for less coverage will see even bigger discounts. Some lawmakers have speculated that drivers who opt-out of PIP coverage could save more than $1,000 per year. In the case of an accident, though, how much coverage do you need for yourself and your family?

There are a lot of questions and PCE Insurance has the answers. If there’s a time to review and rework your auto policy, it’s now. Let’s chat. Call 616-261-2222, Text 616-208-4390, or email info@pceinsurance.com

Your vehicle can be a fairly costly investment—one that is exposed to many potential losses that are out of your control. We’ll make sure you have the protection you need at a price you can afford.