Michigan's insurance rules are changing July 1 – here's what you need to know

Posted at 9:23 AM, Jun 19, 2020

Big changes are coming to Michigan’s auto insurance rules. State and local leaders say the reforms will save you money, but some insurance agents are saying buyer beware.

Starting on July 2, 2020, you will no longer be forced to have unlimited medical coverage for your car insurance. But if you decide to opt out of that to save money, you have a lot of homework to do.

A year ago, Gov. Gretchen Whitmer signed historic auto insurance reforms into law.

As part of the deal, insurance companies must reduce their statewide average premiums for Personal Injury Protection, also known as PIP.

“Those levels now stay in effect for 8 years,” said Anita Fox, the Director of Michigan’s Department of Insurance and Financial Services.

Fox says things like your occupation or where you live can no longer be used against you.

“Certain factors now cannot be used by the insurance company: marital status, credit score, home ownership, educational attainment,” said Fox.

Fox and other state leaders have been holding virtual town halls to educate drivers on the changes that begin with new policies issued after July 1.

Utica-based insurance agent Bryan Ede says reading the fine print on policies has never been more important. Ede is the CEO of Michigan Insurance and Financial Services.

“The cost savings only applies to one coverage, and that’s the PIP coverage,” said Ede.

Ede says with more people choosing less than unlimited personal injury coverage, you could be exposed to litigation.

“You hit someone, hurt someone and they went cheap on their medical. Now all of a sudden they’ve got a $500,000 bill – you are going to get sued. Trust me, someone is going to come after you, whether it be the health insurance, whether it be Medicare,” said Ede.

You’ll also need to look closely at the waivers for personal injury and bodily injury claims that are now required if you opt out of unlimited coverage.

“If you don’t sign that form, the insurance company by law has to upgrade you to $250,000/$500,000 [coverage]. So you could have a huge rate increase because you just missed a form,” said Ede.

Ede agrees the system needed reform, and is grateful that new fee schedules for insurers will hold some costs down. But he says the new law has some unintended consequences. If your health insurance is a qualified plan, you could reduce your auto coverage, although could be financially devastating if you have a catastrophic crash.

“What if you have to be life-flighted out? That could be a $50,000 transport. You’ve already blown 20% of your coverage, and you haven’t laid in a hospital bed yet,” said Ede.

Another important change: if you successfully sue over an injury and win a large settlement to pay for your medical care, you medical insurance can now take that settlement as re-payment on claims, leaving you with little or nothing.