By now, you’ve probably heard that Michigan’s no-fault auto insurance requirements are changing. In fact, the changes are set to go into effect in July 2020, after which drivers should finally begin to see savings on their car insurance rates! As always, the devil is in the details so it isn’t necessarily clear how much we will save so to help you understand how no-fault reform will affect you here is some background on how we got here and what is about to change.
Time For No-Fault Reform
Michigan’s current no-fault auto insurance came into law in the early 1970s. The ‘no-fault’ idea was meant to curb the number of car accident-related lawsuits being filed by effectively making both parties responsible for any accident. In reality, responsibility is still assigned after an accident investigation, however, the insurance companies pay out to each driver as if no one was at fault, or both drivers were equally at fault.
The Highest in the Country
No-fault insurance did its job of reducing the number of lawsuits filed, however, it also led to a steady increase in premiums over the nearly 50 years since inception. Michigan currently has the highest auto insurance rates in the country, in large part because policies are forced to include an unlimited amount of personal injury protection liability coverage (PIP). PIP is the one component of car insurance rates that has contributed the most to rate increases because the cost of healthcare has increased dramatically. Over the same timeframe, car repair costs have gone up as well, making it doubly difficult for Michigan drivers to get affordable auto insurance.
Choose Your Coverage
To address the problem, reform measures are being put in place to allow drivers to choose the amount of PIP coverage they are willing to pay for. Unlimited PIP is still an option, though if you want to reduce your car insurance premiums you can choose $500,000 or $250,000 limits instead. For people who have other qualified sources of health care coverage, there is an option to choose a basic amount of $50,000 coverage, or the ability to opt-out altogether, provided that you and your family members are adequately covered by other plans.
Think it Though
Deciding which level of coverage to pay for is an important choice that you shouldn’t make lightly. While there is the cost to consider, you also have to think about the potential impact of having less coverage if you or your family sustained injuries as the result of a car accident. Is the reduction in premiums worth the risk of receiving less benefit? It’s difficult to say until you know what the new rates look like and we won’t know that until the changes take effect in July. If your policy renews before then, you will be asked to choose in advance. Not choosing will cause your policy to renew with unlimited PIP coverage.
Ask your insurance agent or an insurance broker about the implications of reducing PIP and to help you decide on an appropriate level of coverage. Maybe retaining unlimited PIP while exploring other ways to reduce your auto insurance premiums is the best option for you. Now that you know what is coming, you can make an informed choice or seek advice from an expert.
E&Y Agency serves clients in the Troy, Birmingham, Royal Oaks, Michigan area for many years. We are dedicated to getting you the coverage you need and the best rates possible. Talk to us about the upcoming changes to automobile insurance, health and business insurance for small businesses and self-employed individuals. We are also tax preparation experts and can provide tax assistance in planning, preparing and filing your personal and business tax returns. Call us at (248) 362-1313 or submit the form below with your questions.
