Choosing Your PIP Coverage Level

Since the 2019 Michigan insurance reform took effect on July 1, 2020, Michigan drivers have been able to choose their PIP (Personal Injury Protection) medical coverage level for the first time in the state's history. This choice can significantly affect both your premium and your financial protection after an accident. Here is what you need to know to make an informed decision.

The Five Coverage Options

Under the reformed Michigan no-fault system, drivers can choose from the following PIP medical coverage tiers:

1. Unlimited Lifetime Coverage

This is the traditional Michigan coverage that existed before the 2019 reform. It provides unlimited, lifetime medical benefits for injuries sustained in an auto accident. There is no cap on the dollar amount or duration of coverage.

Who should choose this: Anyone who wants maximum protection. This is especially important for those without robust health insurance, those with families, and anyone who wants peace of mind knowing that a catastrophic injury will not result in financial ruin. Traumatic brain injuries and spinal cord injuries can easily result in millions of dollars in lifetime medical costs.

Cost impact: This is the most expensive option, though the 2019 reforms required insurers to reduce rates for this tier by a set percentage from pre-reform levels.

2. $500,000 Coverage

This option caps your PIP medical benefits at $500,000 per person per accident. Once you reach this limit, your PIP coverage is exhausted, and you must look to other sources (health insurance, out-of-pocket) for additional medical costs.

Who should choose this: Drivers who have good health insurance that will serve as a backup after PIP is exhausted. The $500,000 limit is adequate for many injuries but can be insufficient for severe or catastrophic injuries requiring long-term care.

Risk analysis: A serious spinal cord injury can cost $1-4 million in the first year alone. A traumatic brain injury requiring years of rehabilitation can easily exceed $500,000. If you have strong health insurance and are comfortable relying on it for costs above this threshold, this may be a reasonable middle ground.

3. $250,000 Coverage

This tier provides $250,000 in PIP medical benefits per person per accident. It is available to drivers who have qualified health coverage (a health insurance policy that covers auto accident injuries).

Who qualifies: You must have a health insurance plan that will cover auto accident injuries after your PIP is exhausted. Not all health insurance plans cover auto accident injuries -- you need to verify this with your health insurer before selecting this option.

Risk analysis: While $250,000 may seem like a large amount, it can be consumed quickly in a serious accident. A single hospital stay with surgery can exceed $100,000. Multiple surgeries, rehabilitation, and ongoing care can burn through this limit within months. Consider how your health insurance would handle the overflow -- including deductibles, copays, network restrictions, and lifetime limits.

4. $50,000 Coverage

This is the lowest dollar-amount option, providing only $50,000 in PIP medical benefits. It is available to individuals enrolled in Medicaid.

Who qualifies: Only individuals who are currently enrolled in a Medicaid plan that covers auto accident injuries. If you lose Medicaid eligibility, this coverage level may leave you dangerously exposed.

Risk analysis: This is an extremely low limit. A single emergency room visit with imaging and treatment can cost $10,000-$30,000. Any serious injury -- broken bones requiring surgery, internal injuries, or head trauma -- will likely exceed $50,000 quickly. If you lose Medicaid coverage between the time you select this option and the time of an accident, you could face catastrophic out-of-pocket medical expenses.

5. Complete Opt-Out

Michigan allows certain individuals to opt out of PIP medical coverage entirely, meaning their auto insurance provides zero medical coverage for accident injuries.

Who qualifies: Only individuals who are enrolled in Medicare (Parts A and B). The logic is that Medicare will cover your accident-related medical expenses. However, Medicare has its own limitations, coverage gaps, and payment rates that may affect your access to care.

Risk analysis: If you opt out, Medicare becomes your sole source of medical coverage for auto accident injuries. While Medicare covers a wide range of services, it may not cover everything that PIP would -- particularly attendant care, certain rehabilitation services, and some long-term care needs. Additionally, some medical providers do not accept Medicare, which could limit your treatment options.

Factors to Consider When Choosing

Making the right PIP coverage choice requires evaluating several personal factors:

• Your health insurance quality: Does your health plan cover auto accident injuries? What are the deductibles, copays, and out-of-pocket maximums? Are there network restrictions that could limit your care options?
• Your financial situation: Could you absorb significant medical bills if your PIP runs out? Do you have savings or assets that could be at risk?
• Your household: Remember that your PIP coverage level affects not just you but also passengers in your vehicle and potentially household members
• Your driving exposure: How much time do you spend on the road? Highway commuters face different risk profiles than those who drive only short local trips
• The premium difference: How much are you actually saving? In many cases, the premium reduction for choosing a lower tier is less dramatic than drivers expect, especially once you factor in the coordination with health insurance

The Hidden Risks of Lower Coverage

Many Michigan drivers chose lower PIP tiers to save money when the reform first took effect. However, there are risks that are not immediately obvious:

• Health insurance gaps: Your health insurance may change, be cancelled, or have exclusions you did not anticipate. If your health coverage lapses and you have a low PIP limit, you could be unprotected.
• Coverage disputes: Health insurers sometimes deny claims related to auto accidents, arguing that auto insurance should be primary. This can leave you caught between two insurers, both pointing to the other.
• Treatment limitations: Some providers who specialize in treating auto accident injuries may not accept health insurance or Medicare at the same rates, potentially limiting your access to the best care.
• Lifetime costs of catastrophic injury: The lifetime cost of a spinal cord injury can exceed $5 million. A severe traumatic brain injury can cost $3-10 million over a lifetime. No coverage tier below unlimited adequately addresses these scenarios without robust backup coverage.

How Your Choice Affects Others

Your PIP coverage level does not only affect you. Under Michigan's priority system, your PIP coverage may also apply to:

• Passengers in your vehicle at the time of an accident
• Resident relatives in your household who do not have their own auto insurance
• Pedestrians or cyclists injured by your vehicle (in some priority scenarios)

If you choose a low coverage level, you may inadvertently leave family members or passengers with inadequate protection.

Can You Change Your Coverage Level?

Yes, you can change your PIP coverage level at any policy renewal period or when you switch insurance carriers. However, the change only applies going forward -- it does not retroactively affect coverage for accidents that already occurred. If you currently have a low coverage level and are concerned about your protection, contact your insurance agent to discuss upgrading at your next renewal.

Our Recommendation

While we cannot tell you which coverage level is right for your specific situation, we consistently see clients who chose lower coverage levels and then suffered serious injuries that quickly exhausted their benefits. The premium savings from choosing a lower tier are often modest compared to the potential financial exposure of a catastrophic accident.

If you have been injured in a Michigan auto accident and are concerned about whether your PIP coverage is sufficient, or if your benefits have been exhausted and you need help navigating your options, contact our office for a free consultation. We can also help you understand your rights to pursue a third-party claim against the at-fault driver for additional compensation.