Michigan no fault vehicle insurance and its impact on local residents. 

Joe Knowles

Michigan no fault vehicle insurance and its impact on local residents. 

On July 2, 2020 the No Fault Reform Bill will go into effect, impacting vehicle owners across Michigan. Smith & Eddy Insurance, through MCP, has been working on getting the message out to the public on this major change in vehicle insurance. MCP sat down with Joe Knowles, vice president of Smith & Eddy Insurance to discuss what people need to know. 

MCP: When do vehicle owners need to begin making changes to their policies?

JK: Depending on your insurance provider, changes can start to be made to your policy up to 90 days prior to your renewal date. You will receive a packet from your insurance provider. That packet will contain complicated state mandated forms. We suggest that you reach out at that time to your insurance professional and work together to make the correct elections of coverage for your upcoming renewal. You will need to make both a medical and a liability selection.

MCP: What are the selections that need to be made for the medical protection on a policy?

JK: Vehicle owners will need to select a medical level of coverage. Previously medical coverage was always unlimited, now you can choose to select: $50,000, $250,000, $500,000, or unlimited. There are even options to waive the medical coverage all together if you have qualified medical coverage from another source. This is where your conversation with your agent about your specific coverages is so very important. Our agency isn’t recommending anyone to waive coverage at this time, we expect court litigation to establish new coverage implications and potentially expose new coverage gaps and feel it best to retain your protection until things can be more clearly evaluated.

MCP: That was the medical portion, you mentioned liability as well, what was changing on that?

JK: Bodily injury liability state mandated minimum coverage was 20/40/10 and is now 50/100/10. However the default base level for all in the state of Michigan is moving to 250/500/10. If you elect to select a lower limit of coverage, it will require you to sign and return the form at each renewal of your policy. We believe strongly that liability limits become a much more important piece of your insurance protection, perhaps more than ever before.

MCP: Why is liability so much more important now?

JK: Great question. Here is why: The new law has given everyone in the state a choice to limit or reduce their current medical coverage level and protection. In the past everyone was protected in full and did not have the ability to recover medical losses through litigation from auto accidents. Now they can and will be able to do that. We all now have a much larger potential for catastrophic medical losses becoming part of litigation after an accident, that wasn’t the case prior to this new law.

MCP: What else is changing and what might actually help us save on premiums for auto insurance? That was the original intent of the legislature when they passed the new law correct?

JK: Yes, one immediate impact people will all see: currently each vehicle in the state of Michigan is assessed a fee ($220-$240) that was used to supplement catastrophic auto injuries/losses. That is the Michigan Catastrophic Claims Fund (MCCA) fund. With the removal of the unlimited coverage, the state has reduced that fee being charged by around $100 per vehicle. You should see an immediate savings at your next renewal for each vehicle you insure.

MCP: How does the new law affect who is going to be covered by a vehicle owner’s policy?

JK: With regards to medical coverage on a policy, the new law changes and simplifies what is called “order of priority”. This addresses who is covered under your auto policy for medical costs sustained in an auto accident. Under the new law we now have only three categories: 

• named insured

• your spouse

• resident relative

This resident relative is the one we would like to focus on. How this could become a problem is when you allow the use of your vehicle to other individuals that do not live in your home. We often see this with children living away from the residence and driving our insured vehicle. Their medical is not covered on the policy and if an accident happens without their own in force policy they would not be protected from your policy like they may have been in the past. It is very important that individuals not living in your household or non-relatives that live in your home have their own insurance policy.

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