Urgent alert regarding Michigan Auto Insurance No-Fault changes

You have probably heard about changes to the Michigan No-Fault law but may not realize how it impacts you since the changes took effect July 2, 2020.  It’s critical you understand what these changes will mean to you and your auto insurance policy. If you have questions or wish to discuss options, call MDA Insurance at (800) 860-2272 and speak with one of our personal lines agents as soon as possible. You can also read the latest updates on the State of Michigan website: michigan.gov/autoinsurance.

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CHANGES IMPLEMENTED PRIOR TO JULY 2, 2020:

You were notified by your carrier of the changes that have already taken effect.  Most notably, the law significantly changed the Order of Priority which determines to whom and how PIP (Personal Injury Protection) coverage applies under an auto insurance policy. PIP is the portion of your auto policy that provides medical, rehabilitation and other related benefits.

Pursuant to these changes under the new law, drivers or occupants of a private passenger vehicle are no longer covered for PIP unless they are a named insured on the policy, the spouse of the named insured, or a resident relative of the named insured or spouse.  PIP coverage no longer extends to relatives not living in the household of the named insured (unless away at school) or to a non-relative who resides in the household of the named insured even if listed as a driver on the named insured’s policy.  If either of these two situations apply to you, you must CONTACT OUR OFFICE IMMEDIATELY.

Additionally, any uninsured occupants must now pursue coverage through the MACP and would have a maximum limit of $250,000. The policy carried by the owner or driver no longer provides PIP coverage to uninsured occupants.

CHANGES EFFECTIVE JULY 2, 2020:

Medical Coverage Options: Until July 2, 2020, all auto policies in Michigan are required to provide unlimited PIP benefits. On that date, policyholders will have the option to keep unlimited PIP benefit limits or select $500,000, $250,000, $50,000 (if enrolled in Medicaid), Medicare opt-out or a Qualified Health Coverage Exclusion.

Because of the additional coverages provided under PIP, many of which are not offered under health insurance policies, MDA Insurance is recommending that policyholders continue to carry unlimited PIP benefits on their auto policies after July 2, 2020.  

Liability Limits (BI): After July 2, 2020, the revised, default liability limit will be $250,000 per person/$500,000 per occurrence. You may elect lower limits by signing an acknowledgement form, but not lower than $50,000 per person/$100,000 per occurrence.

Because individuals injured in auto-related accidents will be able to seek financial compensation not covered by their own policy from the at-fault party, MDA Insurance is recommending that policyholders carry no less than $500,000 per person/$500,000 per accident BI limit. Due to the increased likelihood of auto-related liability lawsuits in the state, we also urge you to purchase a personal umbrella policy. Affordable limits up to $5,000,000 are available.

Michigan Catastrophic Claims Association (MCCA) Assessment: Effective July 2, 2020, the MCCA  assessment will drop to $100 per vehicle for those who choose to keep their unlimited PIP benefits. As a result, even those policyholders who keep unlimited PIP benefits will likely see some premium relief. Those who select lower PIP limits will not be charged an MCCA assessment.

What to Expect: Prior to your first renewal after July 2, 2020, your carrier will mail you the forms to make changes to your PIP and BI limits.  If you do not return the forms to the carrier, your policy will renew with unlimited PIP and $250,000/500,000 BI. If you choose to opt-out of PIP, proof of qualified health coverage or other documentation will be required.

Stay Informed: These changes will affect your policy, so it’s important you understand what they mean.  Please call MDA Insurance at (800) 860-2272 to ask questions, discuss your options and understand your choices.  Thank you for allowing us to be your trusted resource as we navigate these significant changes to your auto coverage!

Medicare and No Fault Auto Insurance Changes

According to the Michigan Department of Insurance and Financial Services (DIFS), after July 1, 2020, Michigan Medicare beneficiaries who renew or purchase a new no-fault automobile insurance policy can “opt-out” of Personal Protection Insurance (PIP) medical benefits if they wish. The beneficiary must demonstrate that they are enrolled in Medicare Parts A & B and that their spouse or any relative who resides with them in the same household has either qualified health coverage or auto insurance that includes PIP medical benefits.

Medicare will pay for Medicare-covered services for beneficiaries who opt out of PIP medical benefits and are injured in an automobile accident and have no other available coverage. The beneficiary will remain financially responsible for coinsurance, copayments, deductibles and any other services that Medicare does not cover.

The new law also allows Medicare beneficiaries to purchase lower than unlimited levels of PIP medical coverage–$500,000 or $250,000 per person per accident. If a beneficiary is injured in an accident and exhausts his or her PIP medical limits, and has no other available coverage, Medicare will pay for “Medicare-covered” services.

Before opting-out or choosing a lesser PIP medical benefits we strongly encourage you to consult with your auto insurance agent or a financial advisor so that you are completely aware of what these changes in the law mean from a practical, monetary and risk standpoint.

If you can afford the unlimited PIP coverage, we encourage you to keep it. We also encourage you to talk with your home and auto agent regarding securing an umbrella policy to protect your assets. Changes in the Michigan No-Fault law will mean that if a driver who has opted to have less than unlimited PIP coverage (in order to save money on their auto insurance premiums) is injured in an auto accident involving you, they will be able to sue you to cover their medical expenses that go beyond the limits of their own PIP coverage.

We anticipate the number of lawsuits will increase dramatically as a result of this loophole in the law. Your life’s savings, including your retirement accounts, can be at risk. Umbrella insurance provides another layer of protection.