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New Michigan Auto Insurance Law Set to Go into Effect in July

June 2, 2020

On May 30, 2019, Michigan Governor Whitmer signed auto insurance reform legislation into law. This new law, which goes into effect on July 1st, will provide different insurance coverage options, lower rates, and some additional consumer protections for Michigan drivers. While the changes sound positive, varying coverage options mean you may be able to save a few dollars, but the consequences of the savings could be critical if you are seriously injured in a vehicle accident.

This article will discuss the changes and some of the common questions about the new law.

New Personal Injury Protection (PIP) Coverage Options

The bill was designed to save Michiganders on the Personal Injury Protection (PIP) portion of their auto insurance premiums. However, the savings come at a cost that many Michigan residents aren’t aware of or don’t understand.

The new law requires that auto insurance companies or licensed agents provide you with forms that detail the benefits and risks of the coverage options. The major change is the insured now gets to choose the medical coverage received if injured in a vehicle accident. Right now, all insured Michiganders receive life-long, reasonable medical care if injured in an accident. Under the new law, an insured will pick the level of medical coverage under the PIP part of your auto insurance policy. Here are the five PIP coverage options for drivers, beginning July 1, 2020:

  1. Unlimited PIP coverage (10% reduction) Covers unlimited, lifetime vehicle accident injury medical expenses. Drivers concerned about maintaining their current level of car injury coverage should keep this option.
  2. $500,000 of PIP coverage (20% reduction) Covers vehicle accident injury medical expenses up to $500,000.
  3. $250,000 of PIP coverage (35% reduction) Covers vehicle accident injury medical expenses up to $250,000.
  4. $50,000 of PIP coverage (45% reduction) Covers vehicle accident medical injury expenses up to $50,000. This is the lowest option available for Medicaid recipients.
  5. Opt out of PIP coverage (100% reduction) Drivers can opt out of PIP coverage completely only if they have Medicare or a qualifying health insurance plan that covers vehicle accident injury medical expenses.

The unfortunate truth is that consumers are likely to select the cheapest option.  Consumers always think a catastrophic event will happen to someone else, and wrongly assume they are covered by health insurance for injuries they receive and that insurance will cover all of their expenses.  For those who choose to opt out of PIP coverage, health insurance then becomes the only source of medical expense indemnity for that person. Unfortunately, job loss is common after a serious injury and is often accompanied by the loss of employment-related benefits, like health insurance. Also, even if job loss does not happen, private health insurance often has deductibles, co-pays, and does not always reimburse 100%.  When you suffer a catastrophic injury, even being responsible for a small percentage of health care can be financially devastating.

New Limits on Healthcare Billing

Healthcare is expensive, but medical claims from car crashes are especially prone to price inflation. One study in Michigan found that while auto insurers sometimes paid more than $3,000 for a MRI, Medicare usually paid less than $500 for the exact same procedure.

Michigan law currently requires insurers to pay whatever is “reasonably necessary” to treat vehicle accident victims. Disputes over what’s covered and how much is covered often lead to lawsuits, which further inflates the cost of insurance for all drivers.

On July 1, 2021, Michigan will institute a new medical fee schedule to cap how much insurers are required to pay for medical services and treatments. The limits will phase in starting at 200%-250% of what Medicare would pay for a medical procedure and the rate will drop to 190%-230%, depending on the type of medical facility by 2023.

The problem is, many believe health-care providers will discontinue providing care for those catastrophically injured in car crashes because the reimbursement will be so low.

More Required Liability Coverage

Lawsuits between drivers are limited in Michigan because drivers typically turn to their own insurance provider to cover injury costs after a vehicle crash. Drivers can still be sued if they are at-fault for an accident where a person is seriously injured or dies. That’s where liability coverage comes in.

Before July 1, 2020: Drivers have to buy a minimum of $20,000 of coverage for one person injured or killed in an accident and $40,000 of coverage for accidents with two or more people injured or killed.

After July 1, 2020: Drivers will be offered a default minimum of $250,000 of coverage for one person injured or killed in an accident and $500,000 of coverage for accidents with two or more people injured or killed. Unfortunately, although the default minimum is $250,000/$500,000, drivers will be allowed to request and receive reduced minimums of $50,000/$100,000.

Are There New Consumer Protections?

The law eliminates all non-driving factors. What this means is that insurance companies are now prohibited from using your FICO score, zip code, gender, educational level, occupation, marital status, or residence status to determine your auto insurance rates.

The bill calls for the creation of a new fraud investigation unit to fight criminal and fraudulent activity related to the insurance and financial industries. This group will work with the Michigan Attorney General to enforce insurance laws and to prosecute such crimes. The new law also increases the fines on insurance companies, agencies, and licensed agents for certain violations.

Another change is that auto insurance company rates and policies must now be filed with and approved by the Michigan Department of Insurance and Financial Services before being offered to consumers.


The new Michigan auto insurance law lets you select a level of medical coverage when your policy is issued or renewed after July 1, 2020.

A traffic crash was reported every 1 minute and 41 seconds in Michigan in 2018, so you can see how important it is to have the right amount of auto insurance coverage. The economic exposure and coverage uncertainty that will result from this new law’s reduced options and opt outs did not exist before. Unfortunately, the reality is consumers will face less coverage and more cost. At Buchanan Firm, we are here to help you understand the new law and what it means if you have been injured in a crash. Whether and to what extent you recover reimbursement for your losses from a car crash depends on correct application of the new reformed no-fault law. It is therefore important for anyone injured in such an accident, and especially those who suffered serious injuries, to immediately seek help from an attorney experienced with Michigan’s no-fault law. Even a relatively minor delay can cause you to lose the right to reimbursements. We will review your claim and guide you in obtaining fair reimbursement for the harms and losses.

For a free consultation with an experienced auto accident attorney in Michigan, contact Buchanan Firm. Our firm proudly serves people all across Michigan, including major cities like Grand Rapids, Muskegon, Detroit, Lansing, Holland, St. Joe, and Ann Arbor, and rural towns such as Lowell, Ada, Fremont, Newaygo, Grand Haven, Rockford, and Cedar Springs.

We will meet you after-hours, at home or in the hospital, to accommodate you.

Contact us today!