Drivers looking to save the most money must contact an insurance agent and change their insurance policy on or after
Those who do nothing will see zero savings -- at least at first -- and could potentially get only minimal savings or even face higher insurance rates when their existing policy expires and automatically renews under the new system's default coverage options, which are higher than the required minimums.
"The insurance companies make more money if you stay with the higher rates,"
The revamped system gives
Since 1973, all
Drivers who chose the lowest option,
However, they will go without PIP's unique medical benefits, which cover things that even the best health insurance plans do not, including extensive in-home attendant care, long-term injury rehabilitation and long-term custodial care in specialized centers.
Medicare WILL cover car crashes
Medicare currently doesn't cover car crash injuries for
But the situation changes
6 PIP options
There will be six PIP coverage options under the new system.
The PIP options available to everyone are:
The PIP options for those on Medicare or those with health insurance that covers auto accidents:
The PIP option only offered to those on Medicaid:
Extra steps to get
The new system requires extra steps from drivers who aren't on Medicare and wish to save money by opting out of PIP and relying on their commercial health insurance for auto accident injuries.
For one, not all insurance agents may allow drivers who aren't on Medicare to simply request
Some agents have been giving out wrong information in recent weeks, claiming that only Medicare beneficiaries can get a
In one instance, an agent erroneously told a
Duggan raised the issue of misinformed insurance agents during his recent presentation.
"In some cases, I'm hearing reports of insurance agents giving information that’s wrong," he said. "Insurance agents typically make 10 or 15% commission, so if your car insurance bill goes from
For those with
Even more steps
Additionally, they must sign a form declaring that all relatives in their household either have qualified health insurance coverage, Medicare or an auto insurance policy with some PIP coverage. For instance, if a relative in the house is on Medicaid and doesn't have full PIP coverage on a vehicle, the driver who wants a
“It isn’t enough for you to be covered, it’s everybody in your house, because a relative in your house might ride in your car," Duggan said.
For those in
"It’s going to mean a very substantial amount of money," Duggan said.
Those who go a period of time without auto insurance usually have to pay much higher rates once they do buy insurance. But starting
“Michigan had a disproportionate number of uninsured drivers, and the new auto insurance law clears many barriers to coverage that drivers were experiencing,” Fox said.
Bodily injury minimum goes up
The purchase requirements for bodily injury liability coverage will increase under the new system. This type of coverage protects drivers if they cause an accident that results in serious injuries to someone else.
The minimum amount of bodily injury coverage will be
However, drivers must specifically request the
"You basically need to opt in to reduce your limits," said
Umbrella policies gain popularity
Insurance companies are seeing new interest in umbrella insurance policies among wealthier
Under the new system, injured people can sue a negligent driver to pay for medical bills that exceed the injured person's PIP medical limits. That will be a new situation for negligent drivers, who can currently assume that injured people have unlimited PIP medical policies and therefore won't sue for medical expenses.
"Gosh forbid you hit somebody, gone are the days where you know that person has unlimited," said
Schrock said umbrella policies typically sell for
“I’ve got a dear friend who's a neurosurgeon. He has a lot of assets and a lot of exposure. I talked to him a couple weeks ago, and he has 50/100 (bodily injury) limits," Schrock said. "I said, 'What are you doing?' You have a
Yet for most defendants who aren't wealthy, experiences in other states show it is relatively rare for injured plaintiffs to go after the negligent defendant's personal assets, said
What typically happens is that plaintiffs settle for the negligent driver's liability coverage limits, he said, and don't go after the person's savings or house.
"It is very unusual to pursue a claim beyond the insurance coverage, except in extraordinary circumstances," Bernstein said. “And extraordinary circumstances being that the defendant has significant recoverable assets, or the defendant is some type of corporation with assets."
Credit scoring to continue
The new system forbids insurance companies from using some non-driving factors when calculating a driver's premium. Those newly outlawed factors are gender, marital status, home ownership, occupation and education credentials.
Although insurers will also be prohibited from considering a driver's numerical FICO credit score, they can still use a so-called "insurance score" that is derived from the driver's credit history and functions in similar ways.
Insurers also must stop using ZIP codes when setting rates, but they can still consider a person's address through use of geographic "territories," which can be as small as a census tract or as large as a region such as southeast
Insurance experts say this switch to territories won't end the practice of insurance companies charging higher premiums in areas with more claims and greater risks of loss, such as
Traditional PIP, now split
Some of the confusion about the new PIP coverage options stems from a little-known change happening to PIP benefits.
Under the current no-fault system, PIP generally includes medical benefits and in-home attendant care, as well as three years of lost wages replacement,
The new PIP choice is for the medical and attendant care benefits, which comprise most of PIP's traditional expense.
In addition, all drivers except for Medicare beneficiaries must purchase lost wages replacement benefits. Those benefits replace about 85% of an injured person's work wages, or a maximum
"The new auto insurance law gives drivers new choices related to PIP medical coverage, but there are PIP benefits that motorists will still be required to purchase," said insurance department spokesperson
Contact JC Reindl at 313-222-6631 or [email protected]. Follow him on Twitter @jcreindl. Read more on business and sign up for our business newsletter.
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