When was the last time you checked your car insurance policy? Could you explain what each cover item means?
If your answer is that it’s been a while, or please don’t ask me, you’re in good company. Car insurance is one of the most complex products you can buy.
But it’s more important than ever that you understand your coverage. Michigan’s 2019 no-fault auto law created greater risks for drivers and passengers.
We’ve put together this guide to help you understand the most important changes brought about by the 2019 law.
A big change to “PIP”, the personal injury protection portion of our policies.
All Michigan drivers used to have unlimited medical coverage on their policies, to pay for their own or a passenger’s medical care after a car accident. This coverage is under the PIP (personal injury protection) portion of your policy. The law now allows people to choose lower than unlimited health coverage limits. Most people can choose coverage as low as $250,000. People with Medicaid can choose as little as $50,000, and people with Medicare can opt out of PIP.
However, the experts we consulted are unanimous in advising people to stick with the unlimited medical PIP in their policies. Wayne Miller, a law professor at Wayne State University, says the cost of in-hospital and post-hospital care for a serious accident can easily exceed $250,000 and, in worst-case scenarios, can reach into the millions of dollars. Skimping on PIP coverage, Miller says, is “the ostrich approach to buying insurance. You know, ‘This will never happen to me.'” And of course, you’re not statistically likely to have a terrible, expensive, and change your life. There are millions of drivers in the state of Michigan, and ‘only’ thousands of people get hurt like this. But you buy insurance to protect yourself against the worst. That’s what it’s for.”
But even “unlimited” medical coverage doesn’t cover everything it used to.
Michigan’s old no-fault law used to do that require auto insurance companies to pay a reasonable fee for medically necessary care for car accident injuries, including the most catastrophic injuries of a lifetime. The No-Fault Auto Act of 2019 established rate caps for this care. Brain and spinal cord injury rehabilitation centers and agencies that provide home care can only charge 55% of what they used to charge for care of car accident victims. For the vast majority of these agencies, this amount is less than the cost of providing the care. This is why many have gone out of business or stopped taking car accident patients.
So while our experts still urge people to keep PIP unlimited, it’s not the same cover as it used to be. In many cases, people with catastrophic injuries will no longer be able to receive professional care at home, or extensive rehabilitation services in a specialized residential clinic.
Our story on Annabelle Marsh shows the devastating effect this cap can have.
Brandi Marsh is often the sole caregiver of her five-year-old quadriplegic daughter, due to the no-fault auto law of 2019. “Her life is in my hands,” she says, fearing her exhaustion will cause her to make a mistake that threatens his life.
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 per week and must seek agency care for the rest, if their loved one needs 24-hour care. Many have been unable to get care from the agency since the law changed.
There are new risks, including the risk of being sued.
Here’s another “worst-case scenario” our experts say people, especially those with significant assets, should consider: what if you don’t have enough bodily injury liability coverage. This is the part of your policy that pays for injuries you cause to someone in an accident. Lansing personal injury attorney Steve Sinas says that 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 assets, they are much more likely to sue that person.
“Let’s say a kid is playing in the street and you’re driving home, and you’re rich and you look at your phone because you get a text or something, and you don’t see that kid and you catastrophically injure that kid and he needs attention for the rest of his life,” says Sinas. “And let’s say his parents bought the $50,000 medical expense coverage because they’re on Medicaid, or the $250,000 limit. That child is only going to be covered up to those limits. So now they have to sue for their medical expenses . That’s why we now have to insure more on the other side of the equation, which is with more liability insurance.”
Sinas says wealthy people should consider buying “umbrella” policies. An umbrella policy provides additional money, sometimes several million dollars, to cover the medical costs of someone you injure, in addition to the coverage on your auto insurance policy.
He also says that whatever your financial position, you should have uninsured/underinsured coverage if you can. The law doesn’t require you to have it, but it adds to the benefits you can claim if you’re injured by someone driving without insurance or driving with very low limits.
The new law was supposed to reduce the cost of car insurance. did he
The short answer is, on average, no. Four years after the no-fault law passed, Michigan is once again the most expensive state in the country for auto insurance, according to the consumer website, ValuePenguin.
Doug Heller, director of insurance for the Consumer Federation of America, says the law offered phantom savings by requiring insurance companies to reduce the cost of personal injury protection, but not other parts of the your policy
“So the savings have largely been eaten up by a shift from the PIP premium to other coverages,” says Heller. “Insurance companies are free to raise other parts of your premium and a place where you see it’s bodily injury liability. So it comes out of a different pocket, but it’s the same pair of pants.”
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Heller says if Michigan lawmakers want to lower auto insurance costs, as well as make them fairer, they should give the Department of Insurance and Financial Services the authority to monitor the companies’ profits of insurance, as is the Michigan Public Utilities Commission. controls the profits of public service companies. And he says the state should 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 reduce the cost of my car insurance?
Wayne Miller, a professor at Wayne State, says that instead of lowering your coverage limits, make a few calls to other insurance companies and see what they would charge you for the same coverage you have now.
“The number one suggestion I would make is to shop around,” says Miller. “It’s really remarkable the difference between and among insurance companies for the same exact coverage, for the same demographic.”
It’s also good to keep in mind that even though 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 buying behavior for “loyalty” markers and charge you more because you tend to stick with the same companies year after year, in place to buy
Wayne Miller says the second best way to save money on auto 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.
“No matter how long you keep your vehicle, it’s a depreciating asset,” says Miller. “And the cost of insurance does not depreciate much. So if you really want to save money, keep in mind that older vehicles cancel collision and are comprehensive.”
Finally, you can call your health insurance company and see if you can designate your health insurance as the first to pay accident costs. Sometimes this can lower 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 your state’s coverage guide here.
