When was the last time you looked at your car insurance policy? Can you explain what each coverage item means?
If your answer is, it’s been a while, or please don’t ask me, you’re in good company. Car insurance is one of the most complicated products you can buy.
But it’s more important than ever that you understand your coverage. Michigan’s 2019 auto no-fault law creates more risks for drivers and passengers.
We’ve put together this guide to help you understand the biggest changes brought about by the 2019 Act.
A major change to the “PIP” personal injury protection portion of our policy.
All Michigan drivers use unlimited medical coverage in their policies to pay for their own or a passenger’s medical treatment after a car accident. That coverage is under the PIP (personal injury protection) portion of your policy. The law now allows people to choose from unlimited to lower medical coverage limits. Most people can opt for as little as $250,000 of coverage. People on Medicaid can choose as little as $50,000, and people on Medicare can opt out of PIP entirely.
However, the experts we consulted agreed on advising people to stick with unlimited medical PIP on their policies. Wayne Miller, a law professor at Wayne State University, said hospital and post-hospital care costs for a serious accident can easily exceed $250,000 and, in the worst-case scenario, run into the millions of dollars. Miller says that exclusions on PIP coverage are “the ostrich approach to buying insurance. You know, ‘This will never happen to me.’ And of course, statistically, it’s probably not going to happen to you in a terrible, expensive, life-changing accident. There are millions of drivers in the state of Michigan, and ‘only’ thousands of people are injured this way. But you buy insurance to protect yourself from the worst-case scenario. That’s what this is for.”
But even “unlimited” medical coverage no longer covers everything.
Michigan’s old no-fault law is used Car insurance companies must pay reasonable rates for medically necessary care for a car accident injury, including the most catastrophic, life-long injuries. The 2019 Auto No-Fault Act sets rate caps for that care. Brain and spinal cord injury rehabilitation centers, and agencies that provide home care, can charge only 55% of what they would charge for care of car accident victims. For the vast majority of these organizations, that amount is less than the cost of providing care. This is why many have either gone out of business, or stopped taking auto accident patients.
So, while our experts still urge people to have unlimited PIP, it’s not the coverage it used to be. In many cases, catastrophically injured people will no longer be able to receive professional care at home, or comprehensive rehabilitation services at specialized residential clinics.
Our story on Annabelle Marsh shows the devastating impact of this cap.
Brandi Marsh is often the sole caregiver for her five-year-old quadriplegic daughter because of the 2019 auto no-fault law. “His life is in my hands,” he says, fearing his exhaustion will cause him to make a life-threatening mistake.
The law also limited the number of hours family members could be paid to care for a seriously injured loved one at home. Families are limited to a total of 56 hours a week, and if their loved one needs 24/7 care, the agency must take care of the rest. After the law change, many could not get agency care.
There are new risks, including the risk of litigation.
Here’s another “worst-case” scenario that our experts say people — especially those with significant assets — should consider: What if you don’t have adequate bodily injury liability coverage. This is the part of your policy that pays for someone injured in an accident. Lansing personal injury attorney Steve Sinas says when everyone had unlimited medical coverage, they usually didn’t need to sue the other driver to get the care they needed. Now, if they are injured by someone with significant wealth, they are much more likely to sue that person.
“Let’s say there’s a child playing in the street and you’re driving home, and you’re rich and you’re looking at your cell phone because you got a text message or something like that and you fail to see that child and you’ve catastrophically injured that child and they’re in care for the rest of their lives. need,” Sinas said. “And let’s say their parents buy $50,000 of medical expense coverage because they’re on Medicaid or the $250,000 limit. That kid is only going to cover up to that limit. So now they have to sue for medical expenses. Because of that, we now have to insure ourselves more on the other side of the equation, with more liability insurance.”
Sinas says wealthy people should consider buying “umbrella” policies. An umbrella policy provides additional payments, sometimes in the millions of dollars, to cover medical expenses for someone you injure, on top of the coverage from your car insurance policy.
He also says that regardless of your economic status, you should carry uninsured/underinsured coverage if you can. This is not required by law for you to have, but it adds to the benefits you can claim if you are injured by someone who is driving without insurance or driving with too low a limit.
The new law was supposed to lower the cost of car insurance. Did you?
The short answer is, on average, no. Four years after passing the no-fault law, Michigan is again the most expensive state in the country for car insurance, according to the consumer website, The standard penguin.
Doug Heller, director of insurance for the Consumer Federation of America, said the law offered phantom savings, requiring insurance companies to cut costs for personal injury protection, but not other parts of your policy.
“So those savings have largely been eaten up by shifting PIP premiums to other coverages,” Heller says. ”Insurance companies are free to increase other parts of your premium, and one place where you can see that is bodily injury liability. So it’s coming out of a different pocket but it’s the same pair of pants.”
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Heller said if Michigan lawmakers really want to lower car insurance costs, as well as make them fairer, they should give the Department of Financial and Insurance Services the authority to regulate insurance company profits, the same way the Michigan Public Service Commission regulates utility company profits. And he says the state needs to limit the ability of insurance companies to charge people more based on non-driving factors, such as where they live, or if they don’t have a great credit score.
What is the best way to lower my car insurance costs?
Wayne State professor Wayne Miller says instead of lowering your coverage limit, make a few calls to other insurance companies and see what they’ll charge you for the same coverage you have now.
“The number one piece of advice I would make is to shop around,” says Miller. “It’s really the difference between and among insurance companies for the exact same coverage for the exact same demographic group.”
It’s also good to remember that while you may feel loyal to your insurance company, your insurance company may not feel the same way about you when it comes to setting your rates. Doug Heller says it’s not uncommon for insurance companies to track your overall purchasing behavior for “loyalty” markers, and charge you more because you tend to stick with the same companies year after year rather than shop around.
The second-best way to save money on car insurance is to consider dropping collision and comprehensive coverage if your car is more than five years old and you have a safe driving record, says Wayne Miller.
“No matter how well you maintain your car, it’s a depreciating asset,” says Miller. “And it doesn’t reduce insurance costs much. So if you really want to save money, consider older vehicles canceling your collision and comprehensively.”
Finally, you can call your health insurance company and see if you can designate your health insurance as the first line to pay for the accident. This can sometimes reduce your car insurance costs a bit – but be sure to check with your health insurance company before making any changes to your car insurance policy.
For an explanation of other parts of your insurance policy, see the state’s guidelines for coverage here.