Lessons Learned from Michigan’s New No-Fault Insurance Law


Michigan’s New No-Fault Law that went into effect July 1, 2020 is an extensive overhaul to the insurance law that had been in place for many years. It mandates that every vehicle owner in Michigan purchase basic No-Fault coverage. However, the law is very complex and offers many different options for Michigan residents.

One of the issues that our firm professionals are seeing is that insurance agents may not be properly explaining what each of the options means to their clients. As a result, these consumers are becoming too focused on their premium rather than the coverage that can help limit their financial risks.

Under the old Michigan law, drivers had to purchase a policy that included unlimited Personal Injury Protection (PIP) benefits. But now drivers are able to choose from different PIP coverage options. Those PIP coverage options include:

  • Unlimited PIP coverage
  • $500,000 limit
  • $250,000 limit
  • $250,000 limit with PIP medical exclusion(s); this option is for drivers who have qualified health coverage (not Medicaid or Medicare) that covers auto accident injuries. (This option is available if your spouse and other relatives who live with you have qualified health coverage that will cover auto accident injuries.)
  • $50,000 limit; this option is only for drivers who are enrolled in Medicaid. (This option is available if your spouse and other relatives who live with you have qualified health coverage that will cover auto accident injuries.)
  • Opt-out of PIP coverage entirely; however, you, your spouse and all relatives who live with you must have Medicare or qualified health coverage to be eligible.

We have indicated in past blog articles that selecting a PIP option with less than unlimited coverage, particularly the $50,000 option, can leave car owners in a precarious financial position, should you be injured in an auto, motorcycle or truck accident. It is important to note that you may want to factor in your own personal risk tolerance when deciding which type of coverage you require. This is often what insurance agents or brokers are not explaining, and why so many Michigan drivers are going to be faced with major financial challenges and massive bills following an auto accident.

Consequences of Not Having Enough Auto Insurance Coverage

The attorneys at Kajy Law have witnessed over the last several months first-hand how devastating not having enough coverage can be for families. In one example, a client elected the $50,000 coverage option for her PIP. She was then involved in an accident that required some longer-term care and physical therapy. After just two days in the hospital, she had already used up $18,000 of her $50,000 in medical coverage, based on her auto insurance policy.

Even though this client was released from the hospital after two days, she had several other tests, such as MRIs, office visits, and physical therapy appointments that were necessary, but very costly. Within two months, the entire $50,000 PIP coverage she selected had been exhausted, and any forthcoming physical therapy sessions and doctors’ visits related to these injuries were coming directly out of her pocket. Given how Michigan’s new No-Fault law is written, only such tax-advantaged healthcare accounts such as HSAs or FSAs could be used to pay for these bills, meaning every other charge she was solely responsible for.

This client also indicated that she was unaware of the impact that her decision to choose the $50,000 PIP option could have on her finances. She had not worked with Kajy Law before her accident and as a result, did not have a clear understanding of the new Michigan insurance law. Once again, this is a common theme and very understandable. Michigan’s new No-Fault Law is very confusing and complex so motorists should make sure that they have all the information they need to make the best decision for them.

Proponents of the state’s new No-Fault law have indicated one of the outcomes of this change was that insurance companies would reduce PIP premium rates, and guarantee that they will be reduced for eight years. Yet Michigan drivers should note that the rate reduction applies only to PIP premiums, which is just one part of your entire auto insurance cost. Other associated costs also include the Michigan Catastrophic Claims Association (MCCA) vehicle assessment fee, which cannot be reduced by insurance carriers.

The reduced amount will depend on the PIP coverage that a driver selects. There is a suggested sliding scale of premium reductions based on the chosen option. However, this scale may not be utilized by all carriers.

  • Unlimited coverage would receive on average a 10% reduction
  • $500,000 in coverage would reduce on average by 20%
  • $250,000 in coverage would reduce on average by 35%
  • $50,000 in coverage would reduce on average by 45%
  • Individuals with Medicare or qualified health insurance could opt out and receive a 100% rate reduction on certain portions of PIP, depending on their individual circumstances.

Understand the Impact of Your Michigan No-Fault Auto Insurance Decision

The bottom line is that this is that deciding on your PIP coverage can have a significant and adverse impact financial, mental health and social impact on anyone in your own personal network, including family members and friends. Some of the facts that proponents had been hoping for when advocating for this bill, such as significantly lower premiums, have not come to fruition.

If you have any questions regarding which policy to purchase to assure you are covered in the event of an auto accident, contact Lawrence Kajy and the experienced attorneys at Kajy Law today. We are happy to share our knowledge about Michigan’s New No-Fault Law that could be helpful as you are making decisions for your family.

Should you or anyone close to you be injured in an auto accident, we also have the legal expertise that can help you get what you deserve. Don’t trust your livelihood to just any lawyer – work with a firm who specializes only in car truck and motorcycle accidents. The auto accident attorneys at Kajy Law CARE. To speak to someone right away, please call 877-KAJY-CARES.

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