If you are not quite sure what’s changing with Michigan’s No-Fault Insurance Reform, you are not alone. In this blog post, we will help you understand how your insurance coverage may be impacted and how an umbrella policy can bridge gaps in your automobile coverage.

Previously in Michigan, it was mandatory for drivers to carry unlimited Personal Injury Protection (PIP) benefits, but as of July 2, 2020, drivers can choose from different PIP coverage options:

  1. Unlimited PIP coverage
  2. $500,000 limit
  3. $250,000 limit
  4. $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.
  5. $50,000 limit; this option is only for drivers who are enrolled in Medicaid.
  6. 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.

Qualified Health Coverage must cover auto accident injuries and have a deductible that is less than $6,000 to be eligible for PIP options with a qualified health coverage requirement.

Additionally, these changes also went into effect:

  • Insurance companies must reduce PIP rates.
  • Minimum bodily injury liability coverage limits increased from $20,000 per person and $40,000 per accident to $50,000 and $100,000 respectively. The policy will default to $250,000 and $500,000 respectively (or $510,000 for commercial auto policies) if the policyholder does not make a choice.
  • Mini-tort amount increased.

So, what does this all mean for Michigan drivers?

We recommend you talk with your insurance agent to review any potential gaps in your coverage. Things to review are:

  • What are all your insurance policy limits?
  • What assets do you have?

Umbrella Policies Bridge Gaps

While your auto policy can provide liability coverage relating to an auto accident, it’s often not enough. A personal umbrella policy can extend that coverage to a higher limit and offers broader protection, overlaying your auto, home, and boat policies. A personal umbrella policy can provide $1 million to $20 million in additional liability protection for you, your spouse, and children living with you.

In fact, the frequency and severity of umbrella claims have significantly increased over the past decade. Since 2010, umbrella claims frequency has more than doubled and umbrella claim payouts have increased 67 percent, reaching an average payout of over $500,000.

Auto accidents account for 80 percent of umbrella claims. The mere increase in motor vehicle accidents provides more opportunities for bodily injury claims to payout in excess of $1,000,000, which is the catalyst for an umbrella policy to come into play.

How an Umbrella Policy With an Underlying Auto Policy Pays Out:

Imagine you have an auto policy with $250,000 of liability insurance. You also have $1 million of umbrella coverage.
On the way home from work, you accidentally run a red light and T-bone another car in the intersection. The driver, who is a medical professional, is injured and seeks damages of $700,000 because his injuries prevent him from working while his broken arm heals.

The court finds you liable for the full amount.

The maximum liability on your auto policy is $250,000. After that coverage has been depleted, your umbrella policy
steps in and pays the final $450,000.

If you had not been protected with the additional liability coverage, you personally would have been responsible for
$450,000 in claims against you.

Basically, umbrella policies apply when any activity for which you are found liable results in the payout of a claim that
exceeds the limits of an underlying (typically home or auto insurance) policy. Accidents, lawsuits, injuries while
traveling, and damages caused by teen drivers are just a few examples.

Key Trends Driving Up Umbrella Claims

In addition to auto accidents, liability claims and legal trends are also driving up umbrella claims. Health insurance and medical care costs have increased rapidly over the past couple of decades, which has had a significant impact on umbrella claims.

Although umbrella claims are on the rise, premiums remain affordable. An umbrella policy with $1 million in coverage costs about $150-$300 per year according to the Insurance Information Institute. With its high coverage limit, umbrella insurance generally offers a good value for the coverage.

Have questions about how Michigan’s No-Fault Insurance Reform affects you? Want to learn more about umbrella policies? Let’s Connect!

About the Authors

Connie Greenwood, Personal Insurance Advisor

Connie Greenwood has 35 years of experience as an Insurance Advisor. She enjoys helping her clients and prospects understand their insurance options, and crafting insurance solutions tailored to their unique needs. Connie finds great joy in being a trusted advisor for her clients. She loves helping protect their financial welfare against unforeseen accidents and circumstances and bringing them peace of mind.


Tim Pingel, Personal Insurance Advisor

Tim Pingel has almost 20 years of experience as a personal insurance adviser. He provides individuals, couples, and families with home, auto, and umbrella insurance. His ultimate goal is to be his clients’ trusted adviser and expert, so they have the peace of mind and protection they deserve.