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More savings or more protection? New auto insurance choices mean relief for your wallet

Taking lower protections could be risky if you get into a crash, but it will mean substantial savings.

When it comes time to renew auto insurance policies, Michiganders will be getting a letter in the mail describing how things have changed since the last time they renewed.

That's due to a 2019 law reforming the state's no-fault insurance. The letters will specifically address the new options available to every driver, with different levels of Personal Injury Protection, or PIP.

"In the past," said Anita Fox, director of the state's Department of Insurance and Financial Services, "just to give you a little bit of history here, Michigan was the only state in the union that had unlimited lifetime benefits." 

Those benefits meant anyone injured in a car accident would have their needs met through PIP coverage. Where standard car insurance can pay for a new bumper, PIP pays to fix your broken arms.

“It incidentally covers more than just medical bills," Fox said. "It can cover if you need a home modification, or a specialized van, or other kinds of equipment or things to aid in your rehabilitation from an auto accident."

While that level of protection is great, before the law change took effect in July of 2020, unlimited benefits were the only options for Michiganders.

"Lifetime unlimited benefits are fantastic," Fox said, "but they are also expensive."

Once PA21 went into effect, Insurance companies could then offer lesser levels of protection, which in turn reduced the cost of auto insurance premiums. It had to, according to that reform law, produce a certain level of savings at each level — including unlimited. 

That means no matter what you pick, you'll see savings on your premium. Insurance companies had to prove an average statewide savings of at least 10 percent at the unlimited level, 20 percent at $500,000 coverage, 35 percent at $250,000 and 45 percent at the $50,000 level.

With each level of savings, you also see a loss of protection. Unlimited benefits stay the same, coverage for life regardless of how expensive it gets, but each reduced level will only cover up to that amount per person, per accident. That means if you require more than $250,000 worth of care, you could be liable for those costs if your coverage stops there.

At the $250,000 level you also have the option to opt out of PIP, with your health insurance serving as accident protection. You can do that for select members on your plan, or opt out of PIP entirely with the final option listed on the letter. 

Regardless of what you choose, you need some form of coverage. If you choose to opt out for one or all members on your auto plan, you'll have 30 days to provide evidence of sufficient coverage through healthcare.

13 ON YOUR SIDE reached out to a number of health insurance companies for a comment on how opting out could impact the cost of healthcare, but they all declined to participate. 

"We are not seeing auto-related increases in health insurance," said Fox, "So, we’re seeing savings in auto without seeing a rise in health insurance premiums."

At the $250,000 level, Medicare does count as qualified health coverage, allowing you to opt out of PIP and reduce your auto premium. Same goes for Medicaid at the $50,000 level.

Fox says another way to ensure you're saving the most money possible is to shop around. Each company may have different reasons to quote each price, but the competition can save you in the end.

"You as the insured can always go to your agent, go to your company and change your policy," Fox said. 

Even if you are in the middle of your policy year, you have the ability to change your coverage and lower your protection for savings, or choose more protection.

The Department of Insurance and Financial Services has a hotline designed to answer any and all insurance questions Michiganders have. It's open Monday through Friday from 8 a.m. to 5 p.m. at 877-999-6442.

The department is also holding town halls to clarify how coverage works and how you can save. Two more are scheduled for December 1, 2021 at 7:00 p.m. and January 12, 2022 at 12:00 p.m.

Registration is not required, and you can join the events by clicking on the date and time and following the link.

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