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How to get the cheapest rates


Michigan’s new auto insurance system will go into effect in early July, but drivers cannot sit back and expect cost savings to just show up on their insurance bills.

Drivers who want to save the most money should contact an insurance agent and change their insurance policy on or after July 2 to start taking advantage of the new coverage options.

Those who do nothing will see no savings – at least initially – and could potentially experience minimal savings or even face higher insurance rates when their existing policy expires and renews automatically under the options. default coverage of the new system, which are higher than the minimum requirements.

“Insurance companies make more money if you stay with higher rates,” said Detroit Mayor Mike Duggan during a recent television presentation on the new system. “That’s why they’re not everywhere to spend July 2. “

Michigan law allows drivers to make changes to their no-fault auto insurance policies at any time, including switching to another insurer.

The redesigned system gives Michigan drivers a first choice of medical coverage to buy with their auto insurance. This coverage is called personal injury protection, or PIP, and can account for 50% or more of the driver’s bill in urban areas such as Detroit.

Since 1973, all Michigan drivers have had to purchase potentially unlimited PIP coverage for life. As of July 2, drivers can choose a different amount of PIP coverage offered at different prices.

Drivers who have chosen the cheapest option, PIP coverage of $ 0 (zero dollars), will realize the greatest savings as they will be entirely dependent on their own health insurance to cover injuries related to car accidents, such as most drivers do so in other states.

However, they will be missing out on the unique PIP medical benefits, which cover things that even the best health insurance plans don’t cover, including intensive home care, long-term injury rehabilitation, and emergency care. long-term in specialized centers.

Medicare will cover car accidents

Medicare currently does not cover auto accident injuries for Michigan drivers who are on Medicare. This is because Medicare is considered a “last resort payer” and because all Michigan drivers have had unlimited PIP medical benefits with their auto insurance, there is no reason for Medicare to pay.

But the situation changes on July 2 when the new system starts. Medicare will then begin to cover auto accident bills for beneficiaries who withdraw from the PIP, said Anita Fox, director of the Michigan Department of Insurance and Financial Services.

6 PIP options

There will be six PIP coverage options in the new system.

PIP options available for everyone are:

  • Unlimited coverage
  • $ 500,000 limit
  • $ 250,000 limit

PIP options for those on Medicare or those with health insurance which covers motor vehicle accidents:

  • $ 0 PIP for those with Medicare Part A and Part B
  • $ 0 PIP for those with “qualified” health insurance coverage, which means it covers car accidents and has a deductible of no more than $ 6,000. This option is confusedly called ” $ 250,000 with PIP medical exclusion, “But it’s the same as the $ 0 PIP available to those with Medicare.

The PIP option is only available to people Medicaid:

Additional steps to get $ 0 PIP

New System Requires Additional Steps From Drivers Without Medicare Wanting To Save Money By Opting Out Of PIP And Using Their Commercial Health Insurance For Accident Injury of car.

For one thing, not all insurance agents allow drivers who are not on Medicare to simply request $ 0 PIP. Instead, agents can force them to choose a $ 250,000 PIP plan first, then the “PIP Medical Exclusion” option with that plan to get 0 PIPs. This “$ 250,000 with PIP medical exclusion” plan is essentially the same as the $ 0 PIP plan offered to Medicare beneficiaries.

Some agents have given erroneous information in recent weeks, claiming that only Medicare beneficiaries can get a $ 0 PIP plan.

In one case, an agent wrongly told a Free Press reporter looking for a quote in July that “you would need Medicare” to get $ 0 PIP, and that despite the fact that the reporter has “qualified” health insurance covering car crashes, the lowest PIP option available to them was supposed to be a full $ 250,000 policy that would only result in minimal price savings for an address in Detroit.

Duggan raised the issue of uninformed insurance agents in his recent presentation.

“In some cases, I hear reports that insurance agents are giving false information,” he said. “Insurance agents generally charge a commission of 10 or 15%, so if your auto insurance bill goes from $ 4,000 to $ 3,000, they lose real money.”

For those with VA health insurance coverage, the state insurance department says it is still working with the US Department of Veterans Affairs to determine if a VA plan is considered qualified medical coverage under the new system.

Even more steps

Drivers looking for $ 0 PIP coverage must also obtain proof of “qualified” health insurance from their employer or health insurer and then present this proof to an auto insurance agent.

In addition, they must sign a form stating that all of their family members have Medicare, Medicare or auto insurance coverage with some PIP coverage. For example, if a parent in the house is on Medicaid and does not have full PIP coverage on a vehicle, the driver who wants a $ 0 PIP policy cannot buy it.

“It’s not enough that you are covered, it’s everyone in your house, because a family member can get in your car,” said Duggan.

For those in Detroit, which has the highest Michigan insurance rates, opting for a $ 0 PIP policy could reduce a driver’s total auto insurance bill by about 30% to 50%, according to the mayor.

“It will mean a very substantial amount of money,” said Duggan.

Amnesty now

Those who spend a period of time without car insurance usually have to pay much higher rates after they have taken out insurance. But effective July 2, Michigan will benefit from an 18-month “amnesty” so that uninsured drivers can purchase coverage without penalty.

“Michigan had a disproportionate number of uninsured drivers, and the new auto insurance law removes many barriers to driver coverage,” said Fox.

The minimum of bodily injuries increases

The purchase requirements for personal injury liability coverage will increase under the new system. This type of protection protects drivers in the event of an accident resulting in serious injury to someone else.

The minimum amount of bodily injury coverage will be $ 50,000 per injured or killed person / $ 100,000 per accident if more than one person is injured or killed. The current minimum is $ 20,000 per person / $ 40,000 per accident.

However, drivers must specifically request $ 50,000 / $ 100,000 coverage. Otherwise, the new default option for bodily injury will be $ 250,000 per person / $ 500,000 per accident.

“You basically have to choose to lower your limits,” said Matt McGrail, executive vice-president of the Southfield Meadowbrook Insurance Agency.

General policies gaining popularity

Insurance companies are seeing a new interest in umbrella insurance policies among wealthy Michigan drivers who want to protect their assets from the possibility of a large claim.

Under the new system, injured people can sue a negligent driver to pay medical bills that exceed the injured person’s PIP medical limits. This will be a new situation for careless drivers, who may currently assume that injured people have unlimited PIP medical policies and therefore will not sue for medical expenses.

“My God, I forbid you to hit anyone, the time when you know this person is unlimited is over,” said Dan Schrock Jr., executive vice president at AAA Michigan Insurance. “The overall coverage will be more relevant than ever in Michigan. “

Schrock said that umbrella policies generally sell for $ 1 million and $ 2 million in additional coverage, but can go up to $ 5 million.

“I have a dear friend who is a neurosurgeon. He has a lot of strengths and a lot of exposure. I spoke to him a few weeks ago, and he has 50/100 limits (bodily harm), “said Schrock. I said, “What are you doing? “You have a $ 1.5 million house, and if you think that if you total someone’s Mercedes, they won’t sue you personally after the $ 50,000 starts, you are wrong. ”

Yet for most non-wealthy defendants, experiences in other states show that it is relatively rare for injured plaintiffs to sue the negligent defendant’s personal property, said Mark Bernstein, president and managing partner of the firm. of lawyers Sam Bernstein.

What usually happens is that the complainants are content with negligent driver’s liability coverage limits, he said, and are not looking for the person’s savings or home.

“It is very unusual to pursue a claim beyond insurance coverage, except in extraordinary circumstances,” said Bernstein. “And extraordinary circumstances being that the defendant has significant recoverable assets, or that the defendant is a type of company with assets. “

Credit rating continues

The new system prohibits insurance companies from using certain factors other than driving to calculate a driver’s premium. These newly prohibited factors are gender, marital status, home ownership, occupation and qualifications.

Although insurers are also prohibited from taking into account a driver’s digital FICO credit score, they can still use a so-called “insurance score” which is derived from the driver’s credit history and works similarly.

Insurers should also stop using postal codes when setting rates, but they can still consider a person’s address using geographic “territories”, which can be as small as a census tract or as large as a region like southeast Michigan.

Insurance experts say this move to the territories will not end the practice of insurance companies charging higher premiums in areas with more claims and risk of loss, such as Detroit.

Traditional PIP, now divided

Part of the confusion surrounding the new PIP coverage options comes from a little-known change in PIP benefits.

Under the current no-fault system, PIP typically includes medical benefits and home care, as well as three years of lost wages replacement, $ 20 of “replacement services” daily for those performing household chores. one injured person, plus the survivors. funeral benefits and costs.

From July 2, these traditional PIP benefits separate.

The new PIP choice is for medical benefits and attendant care, which accounts for most of the traditional PIP expenses.

But all Michigan drivers will still have to purchase traditional PIP survivor benefits, funeral costs and replacement services. This coverage will be mandatory.

In addition, all drivers, except Medicare beneficiaries, must purchase lost wages replacement benefits. These benefits replace about 85% of an injured person’s work salary, or a maximum of $ 5,718 per month, for up to three years.

“The new auto insurance law gives drivers new choices in PIP medical coverage, but there are PIP benefits that motorists will always have to buy,” said insurance department spokeswoman Laura Hall.

Contact JC Reindlat 313-222-6631 or [email protected]. Follow him on Twitter@jcreindl. Learn more about business and sign up for our trade newsletter.

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