How to choose the cheapest options
Allworth Guide: How Smart Cars Affect Car Insurance
Amy Wagner of Allworth Financial explains how your smart car can affect your car insurance.
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Since Michigan overhauled its no-fault system a few years ago, purchasing auto insurance has become more complicated and requires new decisions regarding coverage options.
Therefore, it is now a little more work to get the best price offer.
The biggest new choice concerns the scope of health insurance benefits known as Personal Injury Protection (PIP).
Those who do not opt for PIP insurance and simply accept the standard option (unlimited PIP) will generally pay a higher monthly auto premium than someone who chooses lower amounts.
But not everyone is eligible for the cheapest PIP options. And some who are eligible may prefer more comprehensive coverage and the peace of mind that comes with it.
Only those who have Medicare or private health insurance that covers car accidents can save the most money by eliminating PIP coverage. They will then have to rely on their Medicare or health insurance after an accident, which is also the case for injured drivers in most other states.
Here are the key details about the six health insurance options:
Unlimited PIP
This is the default option that is automatically selected when drivers do not make a choice. This is usually the most expensive option, especially in urban areas like Detroit. Until July 2020, all auto insurance policies in Michigan were required to include unlimited PIP.
This option offers potentially unlimited, lifetime medical coverage for accidental injuries. Benefits go beyond those of the best health insurance plans and include services such as home care, ongoing rehabilitation care, accessibility modifications to home or vehicle, and long-term care in specialized facilities. There is also money for lost wages.
However, some providers have stopped accepting new patients for post-acute care due to medical price controls that began in July 2021.
500,000 USD PIP
This insurance option provides PIP coverage of up to $500,000. Once that amount is reached, accident victims must rely on their other health insurance, go without coverage, or try to sue the other driver to pay the excessive medical bills.
250,000 USD PIP
This is the lowest PIP coverage option available to all auto policyholders.
50,000 USD PIP
This option is only available to people enrolled in Medicaid. And there are additional requirements: Any spouse or relative in the person’s household must also either be enrolled in Medicaid, have health insurance that covers auto accidents, or have other auto insurance with PIP coverage of $250,000 or more.
Medicare opt-out
This is a $0 PIP option available only to people with Medicare Part A and Part B or Medicare Advantage. Those who choose it must rely entirely on Medicare, which began covering auto accidents in Michigan in July 2020.
Opt-out for qualified health insurance
This is a PIP opt-out option available only to those with health insurance that covers auto accidents and has an annual deductible that does not exceed $6,000 per person. Proof of qualified health insurance must be submitted every six months.
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Those who choose this option will not receive medical benefits from their auto insurance and will therefore have to rely on their health insurance. Anecdotally, drivers in expensive areas like Detroit can sometimes save around $100 or even more per month by switching from unlimited PIP to opt-out.
Other options, observations
Michigan’s auto insurance reform also established new requirements for carrying personal injury liability insurance, a type of insurance that protects drivers if they cause an accident that seriously injures someone else.
The standard coverage option is $250,000 per person injured or killed, or $500,000 per accident if multiple people are injured or killed. The lowest and cheapest option is $50,000 per person, or $100,000 per accident.
Separately, since the new auto insurance options went into effect in July 2020, insurance agents have seen an increase in the number of Michigan residents purchasing extended liability insurance with coverage of $1 million or more.
The increased interest generally comes from people with higher incomes and assets who want to protect themselves against the possibility of being sued for medical bills. Before the no-fault revision, an accident victim’s medical bills could be fully covered by no-fault insurance. Now, a victim can sue a negligent driver for excessive medical bills when their PIP coverage expires.
It is more difficult to sue negligent drivers under Michigan’s no-fault system than in “tort” states like Ohio. Negligence suits are only allowed in Michigan in cases of serious physical impairment, disfigurement, or death.
Contact JC Reindl: 313-222-6631 or [email protected]. Follow him on X @Subscribe to
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