We will continue to educate our customers about upcoming changes to Michigan Auto Reform.

We have put together the most common questions they are asking us.
If you can’t find your answer here, call us!

What is Changing?

For decades, Michigan auto insurance coverage has been the best of in all of the United States, and come July 2, 2020, that will still be the case. The changes that are happening are related to having a choice on what medical limits you have on your auto policy, a new minimum liability limit as well as some changes on household members. Do not worry if you do not understand all the changes or even what certain insurance terms mean, our website will help you understand what is happening and how it can affect you. As always please call or email us if you have still have questions! We are here to serve and guide you through this law change.

What is PIP and Why Do I Need It?

PIP is short for Personal Injury Protection. The State of Michigan defines it as “all reasonable charges incurred for reasonably necessary products, services and accommodations for an injured person’s care, recovery or rehabilitation.”

Simply put, PIP is medical and rehabilitation coverage that is a part of your Michigan auto policy.  Until July 2, 2020, this has been a mandatory coverage with an unlimited benefit.

Currently within their auto policy, every Michigan driver has the best medical coverage in the United States, which is unlimited medical coverage for life. Yes you read that correctly, unlimited for life! Starting July 2, 2020, everyone will have the option to opt out of this unlimited coverage and choose a lower limit of capped PIP coverage.  The medical coverage choices a customer will have are listed below. Below we have some information to give you an understanding on what PIP covers and what your medical insurance won’t cover.

  • Unlimited
  • $500,000
  • $250,000
  • * $50,000 – certain restrictions apply
  • * $0 – certain restrictions apply

There are several parts to PIP coverage

Allowable Expenses (Medical Expenses)

  • Medical bills – such as your Doctor or Hospital
  • Mileage to your Dr. and other recovery appointments/or bus/taxi fare
  • Rehabilitation – such as needing to learn how to walk again
  • Attendant care – assistance with bathing or dressing types of activities
  • Home Modifications – adding wheelchair ramps, or making the home handicap friendly
  • Vehicle Modifications – adding hand controls or wheel chair lifts
  • Replacement services – housekeeping, lawn mowing, meal prep type of activities that you may be unable to do while recovering.
  • Funeral Benefits – limits are dependent upon what the Insurance Carrier files with the State of Michigan

Wage Loss/Disability Protection – 85% of your wages up to the state mandated maximum for up to 3 years from the date of the accident.

Survivors Benefits – limits are dependent upon what the Insurance Carrier files with the State of Michigan.

What is Covered

Below is an example of expenses that PIP will cover in the event of an auto accident compared to what an  employer sponsored health plan, individual plans, or Medicare plan will.

Coverage Personal Injury Protection (PIP) Health Plan – Medicare
Medical Bills Co pays 100% covered Dependent on plan limits
Mileage to/from Dr appts 100% covered 0% covered
Rehabilitation Services 100% covered 0% covered
Attendant Cares Services 100% covered 0% covered
Home Modifications 100% covered 0% covered
Vehicle Modifications 100% covered 0% covered
Replacement Services $20/day for 3 years 0% covered
Wage Loss up to 3 years 85% (up to state max) covered 0% covered
Funeral Benefits Specific dollar limit on the policy 0% covered
PIP pays for this!

Dave Smith, 35 years old, is in a severe accident where he sustains a traumatic brain injury. Dave is placed a rehabilitation facility to learn how to walk, talk, and do basic functions again. He will need rehabilitative care for the remainder of his life. This lifetime cost of Dave’s care is over 10 millions dollars.

PIP pays for this!

John Smith, 22 years old, is in an auto accident and is paralyzed from the waist down. He still has the ability to drive, but his car needs to be modified to allow him to do that and his house needs to be handicap accessible for his wheelchair. Every few years John needs a new wheelchair and modifications made to his vehicle.

PIP pays for this!

Mr. & Mrs. Jones decide the most they want for the PIP coverage is $250,000. They have a daughter, Jessica, the age of 5. Unfortunately they are in very serious accident and Jessica becomes paralyzed from the waist down. Jessica will only have the $250,000 for medical expense coverages. When Jessica is 25 and ready to move out the home the medical coverage expense will be used to the limit due to medical and physical needs up until this point. The home she purchases she will have to pay out of pocket to make wheel chair accessible. When Jessica turns 50 and the wear and tear on her body makes it difficult to transfer from the bed to the chair she will need a lift to assist her, that will be paid out of pocket. If Mr. & Mrs. Jones would have selected unlimited all of these expenses would be paid and Jessica would not have to worry about anything.

Will My Auto Insurance Cost Go Down?

Yes! After 7/2/2020, your policy will renew with ~$120 per car savings from the MCCA fee (more info on what the MCCA is as you scroll down on the page). Additionally, there is state mandated rate reductions on the PIP portion of your auto insurance premium. The savings will vary based on what you choose. If you stayed with the recommended unlimited medical option, your rates will still decrease compared to what you are currently paying.

What is Auto Liability?

Auto Liability is coverage that protects you and your assets in the event that you are named in a lawsuit due to an auto accident. That State of Michigan sets the minimum amount of coverage that you can legally have. The current minimum limit is $20,000 per person and $40,000 per accident. Broken down, this means that you can injure 2 people in one accident and they will each get $20,000 for a total policy payout of $40,000. This is changing with the new law.

  • The default limit will become $250,000 per person and $500,000 per accident as of 7/2/2020- if you want lower limits you will need to request a decrease and you will need to sign paperwork stating that you understand the risks of having lower limits.
  • The lowest that you will be able to choose will be $50,000 per person and $100,000 per accident.
  • Lower limits are not always the best choice.

What are the risks of lower limits?

Simply said “lawsuits” and possibly a lot more of them. Why?

  • With everyone being able to choose their own PIP (medical) limits, they could choose too low a limit and not have enough coverage. If you are even partially at fault in an accident, you can be sued for damages.

The criteria for what you are allowed to be sued for is also changing.

  • Before 7/2/2020 lawsuits for damages could only be brought for 3 things. Death, disablement, or dismemberment.
  • After 7/2/2020 it changes, the new criteria says:
    • injury has to be due to an auto accident.
    • has to impair a bodily function.
    • has to affect a person’s ability to live a normal life.
  • It’s a very broad definition and open to interpretation.

Keep in mind that you do not need to have a lot of assets to have a judgement against you.

  • If you have a job and have been found liable for injuring another, your wages can be garnished.
  • If a young driver in your household, injures someone in an accident you can be held liable.

So, what can I do to protect myself and my family?

  • Have adequate liability limits, most of the time the difference in price is not a large as you think it will be.
  • Talk to your agent about a personal liability umbrella policy.
    • This is an additional policy to help protect you if you are involved in a lawsuit.
    • In some cases, you can get an additional discount on your auto and home if you purchase an umbrella policy.
    • Most umbrellas offer coverage for defense costs.

Auto liability real life examples

A young driver, who recently got his license was caught in a heavy snow fall. Temperatures dropped, the road became slick, he hit a tree. He had his girlfriend in the car with him and she ended up in the hospital with multiple injuries. Her parents chose a low limit for PIP (medical) coverage and they quickly exhausted that limit and had to pay out of pocket for their deductibles and co-payments for their employer sponsored health plan. Their daughter was in a wheelchair, but continues to need rehabilitation to help her to walk again. Her parents filed a lawsuit against the drivers’ parents. The driver’s parents auto policy and the umbrella policy paid out to the policy limits.

A 40-year-old driver was stopped at the top of a hill early on a sunny morning. She needed to make a left turn and could not see the motor cycle that was coming up the hill because the sun was in her eyes. She turned in front of the motor cycle, he hit her and he passed away as a result. He left behind a special needs’ child, of which he was the only caretaker. She was found at fault and the judgement against her was over 1 Million dollars. Her auto policy and umbrella policy covered this claim.

The young woman was driving on the highway when she accidentally drifted over the center line hitting the oncoming car. The woman was at fault and her auto insurance liability limits did not cover the entire claim amount. Because the woman did not own a home or other asset her future wages were garnished for 10 years to settle the claim. Increased auto liability limits and an umbrella would have better protected this driver.

Please talk to you Sterling Agent today for more detailed information, call us at 586-323-5700.

Who is in Your Household?

The new insurance reform laws change who can be insured on your auto policy.

  • It states that only a “named insured, spouse or resident relative of either” is eligible for PIP coverage on your policy.
  • If there are other people that are listed on your policy that do not qualify under this rule, they do not have the correct coverage and can be responsible for paying medical bills related to an auto accident.

The key here is the phrase “resident relative”.

  • What is a resident relative?
    • This is someone that is legally related to you and that lives in your household full time.
    • A child that is going to school, and lives there during the school year, but lives in your home during breaks and the summer.
  • What is not a resident relative?
    • A girlfriend or boyfriend that lives with you.
    • A friend that is just staying with you temporally
    • A child that has left your home to go to school, or work and has no intention of living with you again.

If you have anyone that is not a resident relative listed on your policy, or that drives your vehicles regularly, you need to call and talk to an agent, right away, to find out what the options are to correct this.

If someone on your policy is found to not be a resident relative at the time of an accident, they will only have a limited amount of coverage out of the Michigan assigned claims plan.

What is an Umbrella and Why Do I Need It?

An umbrella insurance policy is extra liability insurance coverage that goes beyond the limits of the insured’s homeowners, auto or watercraft insurance. It provides an additional layer of security to those who are at risk of being sued for damages to other people’s property or injuries caused to others in an accident

A personal umbrella policy provides two types of coverage: liability and defense costs. Umbrella policies can cover what primary insurance excludes and/or additional coverage beyond the limits set in your other insurance.

Samples of claims an umbrella policy

An insured permitted several of her children and their friends to play paintball in her large back yard. The children were advised of all safety precautions including to use face and neck protection at all times. A paintball participant removed her headgear as she was leaving the field and was struck in the eye with a paintball. The claim was settled for more than $475,000.

The insured was driving on the highway when she accidentally drifted over the center line hitting the oncoming car. The insured was at fault and her auto insurance liability limits did not cover the entire claim amount. Because the insured did not have a home or other assets her future wages were garnished for 10 years to settle the claim.

An insured’s son had a friend over for a play date. The kids were playing with the family dog. The family dog bit the son’s friend in the face resulting in multiple reconstructive surgeries. The injured child’s parents settled for roughly $10,000,000.

What is MCCA?

The Michigan Catastrophic Claims Association (MCCA), a private non-profit unincorporated association, was created by the state Legislature in 1978. Michigan’s unique auto insurance no-fault law provides unlimited lifetime coverage for medical expenses which result from auto accidents. The MCCA reimburses auto no-fault insurance companies for each Personal Injury Protection (PIP) medical claim paid in excess of a set amount. Currently that amount is $580,000. That means that the insurance company pays the entire claim, but is reimbursed by the MCCA for medical costs over $580,000.

All auto insurance companies operating in Michigan are assessed to cover the catastrophic medical claims occurring in Michigan. Those assessments are generally passed on to auto insurance policyholders. The 2019-2020 assessment is $220.00 per vehicle. The Michigan Catastrophic Claims Association (“MCCA”) is lowering the assessment charged per vehicle to $100 for the period beginning July 2, 2020 through June 30, 2021.

Definitions

Click the link below to download and view common terms used.