Michigan auto insurance: How to pick the cheapest options under no-fault

Since Michigan overhauled its no-fault system several years ago, buying auto insurance is more complicated and requires new decisions on coverage options.

So getting the cheapest price quote now takes a little more work.

The biggest new choice concerns the amount of medical benefits coverage, known as "personal injury protection" or PIP.

Those who don't make a PIP choice and simply accept the default option — unlimited PIP — will generally pay a higher monthly auto premium than someone who chooses lower amounts.

But not everyone is eligible to get the lowest PIP choices. And some who are eligible might prefer to get fuller coverage and the accompanying peace of mind.

Only those with Medicare or commercial health insurance that covers auto accidents have the option to save the most money by dropping PIP coverage. They will then need to rely on their Medicare or health insurance after an accident, which is what injured drivers do in most other states.

Here are key details on the six medical benefits coverage options:

Unlimited PIP

This is the default option that is automatically selected if drivers don't make a choice. It is usually the most expensive option, especially in urban areas such as Detroit. Until July 2020, all Michigan auto insurance policies had to come with unlimited PIP.

This option provides for potentially unlimited, lifetime medical coverage for crash injuries. The benefits are above and beyond those in the best health insurance plans, with services such as in-home attendant care, continuous rehab care, accessibility modifications for a home or vehicle and long-term custodial care in specialized facilities. There is also money for lost wages.

However, some providers have stopped accepting new patients for post-acute services because of price controls on medical services that began in July 2021.

$500,000 PIP

This coverage option provides PIP coverage up to $500,000. Once the limit is reached, accident victims must rely on whatever other health insurance they have, go without coverage or try to sue the other driver for payment of the excess medical bills.

$250,000 PIP

This is the lowest PIP coverage option available to all auto policyholders.

$50,000 PIP

This option is only available to people enrolled in Medicaid. And there are additional requirements: Any spouse or relative in the person's household must also be either enrolled in Medicaid, have health insurance that covers auto accidents or be under another auto policy with $250,000 PIP coverage or higher.

Medicare opt-out

This is a $0 PIP option available only for those with Medicare Part A and Part B or Medicare Advantage. Those who choose it must rely entirely on Medicare, which, since July 2020, has covered auto accidents in Michigan.

Qualified Health Coverage opt-out

This is a PIP opt-out option available only for those with health insurance that covers auto accidents and which has a per-person annual deductible no higher than $6,000. It requires submission of a proof of Qualified Health Coverage form every six months.

Those who choose this option get no medical benefits from their auto insurance policies, so they fall back on their health insurance. Anecdotally, drivers in high-cost areas such as Detroit can sometimes save around $100 a month or even more when going from unlimited PIP to opting out.

Other options, observations

The auto insurance overhaul in Michigan also set new purchase requirements for bodily injury liability coverage. This type of coverage protects drivers if they cause an accident that results in serious injuries to someone else.

The default coverage option is $250,000 per person injured or killed/$500,000 per accident if several people are injured or killed. The lowest and cheapest option is $50,000 per person/$100,000 per accident.

Separately, insurance agents have seen an uptick in Michiganders buying umbrella liability insurance coverage of $1 million or more since the new auto insurance options took effect in July 2020.

The heightened interest is generally from people who have higher incomes and assets to protect against the possibility of getting sued for medical bills. Prior to the no-fault overhaul, an accident victim's medical bills could have entirely been covered by no-fault insurance. Now, a victim can sue a negligent driver for excess medical bills if their PIP coverage runs out.

It is more difficult to sue negligent drivers under Michigan's no-fault system than in "tort" states such as Ohio. Negligence lawsuits in Michigan are only allowed in cases of serious bodily impairment, disfigurement or death.

Contact JC Reindl: 313-222-6631 or jcreindl@freepress.com. Follow him on X @jcreindl