As you may already know, Michigan residents pay some of the highest auto insurance rates in the United States. To address this issue, Michigan lawmakers passed a new auto insurance law that can help alleviate these high costs.
Starting July 2, Michigan residents have the ability to choose the level of Personal Injury Protection (PIP) that they receive. Prior to this date, Michigan residents did not have the option to choose their level of PIP coverage – everyone received unlimited PIP coverage.
Now, Michigan residents can opt out of full medical coverage, which can save them on their monthly premiums and possibly hundreds of dollars on an annual basis.
But should Michiganders cut back on their PIP coverage? How much can you save on insurance? What’s the risk of opting out? You can learn all about Michigan’s new auto insurance law and the changes that have been put into place at driveprotected.org but here are some of the key takeaways.
Personal Injury Protection Coverage Options
With the new law, there are six PIP coverage plans that Michigan drivers will be able to choose from:
- Unlimited coverage – this was what Michigan residents were originally paying for
- Up to $500,000 in coverage
- Up to $250,000 in coverage
- Up to $250,000 in coverage with PIP medical exclusion(s)
- Up to $50,000 in coverage
- PIP medical opt-out – only available to drivers with Medicare
When it comes to PIP coverage, the amount covered is for all of the individuals in the vehicle in a crash. For example, if four people are in your car during an accident, PIP would cover medical expenses of $500,000 for all four of them – not $500,000 each. Assuming medical expenses would be the same, that would be up to $125,000 per person.
Lowering PIP coverage to a low level runs the risk of being underinsured. If you are involved in a serious auto accident with high medical costs, you could find yourself in a bad financial situation if you do not have adequate insurance coverage. Medical expenses from an accident can be drawn out over many years, so it is important to hope for the best but plan for the worst when it comes to choosing the right level of coverage.
What level of medical coverage is ideal?
What does it mean to be properly insured? This largely varies by individual – what you need in coverage may not be the same as what your neighbor or close friend needs as it is based on a number of factors, such as:
- If you have dependents like a partner or child
- Your current age
- Whether you own a home or rent
- Your net worth and current stage of wealth building
There is clearly a balance to find the ideal level of coverage for you, but it is something that you should discuss with a licensed insurance agent or financial professional. They can help assess your individual. Many agents have baseline or standard coverage levels and will not recommend coverages that are below certain thresholds.
Whatever you do, it is extremely important to not be underinsured. The number one cited reason for personal bankruptcy is due to high medical expenses, so not having adequate medical coverage can lead to extreme financial problems in the event of a serious auto accident.