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Will Michigan’s New Auto Reform Insurance Really Cost Less?

Insurance servicesMichigan’s much talked about new auto reform law goes into effect July 2, 2020. Following promises of savings to policyholders, many may wonder just when they will see evidence of a reduced cost. While there are cost reductions in some areas, policyholders may see little overall savings, and many may actually end up paying more.

The attorneys at Jay Trucks & Associates talk about some of the choices you will be able to make under the new law and how these options may play out when you need to access the benefit through an injury claim.

Selecting Your Coverage Options

When your current policy comes up for renewal, your insurance provider will send you a selection form so you can inform them of the options you want. It is important to make sure you understand what will and will not be covered after you have made your selections. Ask your insurance agent to explain any areas that seem unclear. Here are the areas where you will be able to choose your level of coverage:

Personal Injury Protection (PIP) Benefits

For the first time ever, Michigan drivers will be able to choose the level of PIP coverage that fits their needs and budget. 

Instead of one, there are now six options, from unlimited PIP coverage, to fully opting out of PIP benefits altogether. However, be aware that all drivers will not be eligible for all options. For example, you must have a “qualifying” health insurance plan to be eligible to fully opt out of PIP benefits. 

Overall, you will see a reduction in PIP premiums, percentagewise, according to the level of coverage you choose. If you stick with the unlimited PIP coverage, your premiums will be reduced by 10 percent, and those savings increase with each level of reduced coverage you select. That may sound good, especially since the rates are guaranteed for eight years, but remember that PIP benefits are only a portion of your premiums. Additionally, if you do not make a selection, your PIP benefits will automatically default to the unlimited option.

If you exhaust your PIP benefits, you will have to pay the remainder of your medical costs out of pocket. 

Bodily Injury Liability

Under the old law, the minimum required bodily injury coverage was $20,000/$40,000 per person/per accident. Going forward, policyholders will be required to purchase at least the new minimum of $50,000/$100,000 per person/per accident. If you do not select an option for bodily injury coverage, your policy will automatically default to the state's new recommended minimum of $250,000/$500,000 per person/per accident.

Michigan Catastrophic Claims Association

The Michigan Catastrophic Claims Association (MCCA) was implemented in 1978 to help reimburse no-fault car insurance companies for each instance where unlimited lifetime medical benefits were being paid to a policyholder. The MCCA contribution only occurs once the set PIP amount has been paid out for a single claim - currently that amount is $580,000. All drivers in the state pay an annual fee of $220 per vehicle into these funds. 

Under the new law, policyholders will see a 55 percent reduction in this fee, but this is a one-time savings for the 2020-2021 calendar year only. If you select any option other than the unlimited PIP benefits, you will still pay a reduced fee into the MCCA funds, but only if their budget is in deficit. However, only policyholders with an unlimited PIP benefit plan will continue to benefit from the MCCA.

Completing Your Selection Form

Many may be tempted to simply go with the cheapest options, especially if budgetary needs require it. However, that may not always be the most cost-efficient choice. It is important to understand each type of coverage, the protection it offers, and whether that option will provide the funds you need if you are involved in a car crash. 

For example, if your auto insurance company tells you that you have a qualifying health insurance plan, you may not want to rush into eliminating all your PIP benefits. Some health insurance policies have lifetime limits. If you meet or exceed those lifetime limits after a car crash, you will not have available medical coverage for other illnesses or injuries under your health insurance plan.

So, at the end of the day, where policyholders may really save is in selecting coverage options that will most benefit them - and protect them - from paying out-of-pocket in the event of an accident.

Contact an Attorney For Legal Help After a Car Crash

Our attorneys at Jay Trucks and Associates welcome the opportunity to help car crash victims in Clare, Michigan and other cities throughout the state. We have been helping injured victims for more than 30 years and recovered millions in compensation for our clients. 

Take advantage of our free initial consultation to meet with one of our Clare car accident attorneys and learn more about your legal options after a car crash. If we represent you, there is nothing to pay unless we first obtain compensation for you through a settlement or verdict.

Jay Trucks & Associates:  (800) 762-8623