Michigan no-fault insurance reform brings choice and risks
As Michigan drivers are renewing their auto policies, they’re being presented with a choice not seen since the Michigan No-Fault Automobile Insurance Law took effect in 1973. While certain components of this law have led to some of the highest premiums in the country, they’ve also provided the most generous protections for policyholders via unlimited Personal Injury Protection (PIP) requirements. As a result of legislation passed in spring 2019 and going into effect July 2, 2020, policyholders will now have a choice on this PIP coverage.
What should you do?
PIP coverage is more generous than what’s provided by typical health insurance, Medicare, long-term care, and disability policies. It will be very tempting to consider lowering PIP, and statistics may even support the move (for example, PIP claims don’t often exceed $250K or $500K). However, while the chance of exceeding these limits can be viewed as remote, doing so typically creates a significant strain (financial and otherwise) on the policyholder and their loved ones. Therefore, for those who can afford the premiums (which will still be lower, by at least 10%, going forward under the new law), we suggest considering the unlimited PIP coverage.
For those considering reducing coverage, it’s critical they have a conversation with their insurance agent prior to making that election. They should also take the time to understand the coverages available through their other policies (like health insurance) specific to auto accidents and understand gaps resulting from making changes.
What else should you be thinking about?
Even if you choose unlimited PIP coverage, many others will make the understandable choice to reduce their coverage due to cash flow reasons. As a result, more drivers on Michigan roads will have limited coverage. Therefore, the financial need to file suit will be greater for those drivers moving forward if seriously injured in an accident.
Due to this new reality, we recommend drivers:
- Consult the appropriate advisors to review your property and casualty insurance coverages, including umbrella liability.
- Review new choices for bodily injury coverage, which covers costs for other injured parties in an auto accident. This coverage should be incorporated into such discussions.
- Be intentional around how assets are titled and, for those with significant assets, understand asset protection strategies that align with estate planning goals.
Exposure will increase once the new law goes into effect in July, so start having discussions with your trusted advisors now. Do you still have questions? Feel free to reach out. We’re happy to help.