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Michigan’s New No-Fault Law: The First 6 Months In Review

Two cars in a head-on collision.

We felt it was a good time to review the impact of Michigan’s new no-fault law after the first six months that the law has been in place. The new law places a higher burden of decision on motorists, and in many cases, these motorists may not understand all the details that go into their decision-making process.

One thing to consider is that we have seen clients who were injured in an auto accident but had made the fateful decision to select only $50,000 for PIP coverage. What that means is that once $50,000 in healthcare costs has already been spent, the injured individual would likely have to cover the remaining cost from his or her own pocket.

Hospital stays can easily average tens of thousands of dollars, and injured motorists often will need some type of physical therapy to assist in their recovery. Each car accident has a different financial burden that will depend on the number of damages and injuries. Across the country, car accidents rack up an estimated $44 billion in medical and work loss costs each year.

The average claim for bodily injury, as reported by research firm Verisk Analytics in 2018 was over $15,000. That might sound like a lot of money, but when it comes to medical bills, that is relatively low. And since the costs of medical services tend to rise over time, those costs will only get larger.

As a reminder, new PIP coverage options and corresponding required average rate reductions give motorists the following options:

  • Unlimited — Full coverage (10% required rate reduction)
  • $500,000 — Slight savings for less coverage (20% required rate reduction)
  • $250,000 — Less coverage, more savings (35% required rate reduction)
  • $50,000 — Required to be on Medicaid to qualify (45% required rate reduction)
  • No coverage — required to be covered under Medicare Parts A and B or qualified healthcare coverage (100% rate reduction)

Based on the recent approval of rate filings for auto insurance companies that make up roughly 25% of the marketplace, consumers could see an average additional savings of 5-10% on top of the required average rate reduction, dependent on the level of PIP coverage selected.

Why this matters to drivers

Simply put, we recommend that consumers talk to their insurance agent or carrier and ask questions about their options. If something is not clear, then press for an answer. It is critical to note that if you do not make an election, your coverage defaults to unlimited. This may or may not be your intent, although our firm would recommend thinking twice before you select PIP coverage at the $50,000 level in case you or someone under your policy is involved in an auto accident.

Consumers also need to understand their healthcare might not provide coverage in the event of an auto accident These details will impact the decision about the level of PIP coverage to elect. When reviewing your healthcare coverage, it is important to understand that coverage of medical expenses by your healthcare plan related to an auto accident will not be as comprehensive as the medical expense coverage in your auto policy. Generally, your auto insurance will provide the most extensive coverage. If you are injured in an accident, this becomes an important detail.

There are many more details to Michigan’s new no-fault insurance law that we can cover here, but you can always get a free copy of our report by email or mail which provides further details. It is important to educate yourself. Our attorneys at Bashore Green are here to help in case you are involved in an accident. However, we always find that the best client is one who was informed about this new law before an accident occurs.