Michigan’s New No-Fault Car Insurance Law and How It Impacts Insurance Requirements

Starting in July 2020, Michigan drivers need to make a few crucial decisions with their car insurance. Historically, Michigan law required that motorists had to purchase a policy that provided unlimited, lifetime Personal Injury Protection (PIP) coverage. This insurance offered robust coverage in the event of an accident. In an attempt to lower premiums in 2019, the Michigan legislature passed a law allowing motorists to choose the amount of coverage they wished to purchase. Depending on what coverage is purchased, the new law may provide small savings on premiums but it will result in drastic limitations in benefits if someone is catastrophically injured in an automobile accident.

To fully understand those changes, a brief explanation of PIP insurance is necessary.

Under a no-fault or PIP system, anyone injured in a Michigan car accident can file a PIP claim with their own insurance company. This is considered a “no-fault” system because an injured motorist could file a PIP claim without regard to who caused the car accident. For example, if two cars were involved in an accident, and both drivers were injured, each driver would file a claim with their insurance company seeking payment for their medical expenses and lost wages.

The new Michigan No-Fault Law does away with the requirement that all motorists obtain unlimited, lifetime PIP protection. Instead, lawmakers have created five different PIP coverage options:

• Unlimited PIP: This coverage option would keep motorists’ insurance limits as they were under the old system.
• $500,000 of PIP coverage: This option would provide $500,000 in coverage.
• $250,000 of PIP coverage: This option would provide $250,000 in coverage.
• $50,000 of PIP coverage: This option would provide $50,000 in coverage.
• Opting out of PIP coverage: Drivers covered by Medicare or another qualifying health insurance plan that includes the cost of car accidents can entirely opt-out of PIP coverage.

Although Michigan is largely a no-fault state, an injured motorist can pursue a third-party claim against another driver’s insurance policy when:

• Someone is killed, seriously injured or permanently disfigured in the accident;
• The accident involves an out-of-state driver and a vehicle not registered in Michigan; or
• The accident occurs outside of Michigan.

In these situations, the no-fault aspect of Michigan’s car insurance law does not apply, and an injured motorist can pursue a claim against the at-fault driver’s insurance company.

Before the new law, Michigan drivers were only required to obtain coverage of $20,000 per person/$40,000 per accident. However, as of July 1, 2020, insurance companies must offer default coverage of $250,000 per person/$500,000 per accident. Vehicle owners may purchase more or less coverage, as long as they obtain coverage of at least $50,000 per person/$100,000 per accident.

When choosing insurance coverage, Michigan vehicle owners should consider more than just the potential cost savings of a lower-limit policy. For example, a motorist who obtains just $50,000 in personal injury protection can only recover up to $50,000. Given the increasing cost of medical care, a PIP policy with just $50,000 leaves many accident victims with substantial uncovered medical expenses. So, while a low-limit policy may save some money in the short term, purchasing such a policy negates the purpose of having insurance.

The decision to purchase uninsured/underinsured motorist (UM/UIM) protection is another crucial consideration for Michigan drivers. Uninsured/underinsured motorist coverage kicks in to cover an accident victim’s expenses, including pain and suffering damages, if the at-fault party is uninsured or lacks sufficient insurance to cover the injured motorist’s damages. As noted above, even under the new law, vehicle owners need only purchase at least $50,000 in bodily injury liability. Thus, if an accident occurs resulting in serious injury or death, an accident victim or their family may only look to the at-fault party’s insurance company for $50,000. Of course, in serious accidents, this will prove far less than necessary to compensate an injured driver or passenger for their injuries fairly.

The lawyers at Sommers Schwartz make the following recommendations regarding your purchase of automobile insurance under the new law:

1. Purchase the unlimited medical coverage if at all possible. This protects you and your family if you suffer a catastrophic injury in an automobile accident.
2. If you absolutely cannot afford the unlimited coverage, purchase as much coverage as you can possibly afford.
3. Purchase as much uninsured motorist coverage (UM) and underinsured motorist coverage (UIM) as your insurance company will sell you. If your insurance company does not offer at least $500,000 in UM coverage and UIM coverage, find a new insurance company. This coverage is very inexpensive and provides protection to you if you are hit by someone without coverage or with inadequate coverage.

Contact an Experienced Michigan Car Accident Law Firm

If you or a loved one suffered a severe injury in a Michigan car accident, contact the dedicated team of attorneys at Sommer Schwartz, P.C.

For more than four decades, our dedicated team of injury lawyers has fought for individuals and families involved in serious car accidents in Detroit and across the state, helping our clients obtain the compensation they need and deserve. To learn more about how we can help you pursue a claim for compensation, call us today at 866-753-7774 to schedule a free consultation.