The legality of No Fault deductibles and why you should never choose high medical deductibles on your car insurance
No Fault deductibles are relatively new in Michigan, which is why there are still some Michigan attorneys mistakenly telling clients that these are illegal. They’re not. The Michigan Legislature recently removed the $300 maximum medical deductible from the No Fault Act (Public Act 454 of 2012 amended MCL 500.3109(3)). And, as you might expect, some auto insurers in our state are now going hog wild and charging extremely high dollar amounts for the medical deductible on your No Fault auto insurance policies.
Here’s one ugly example:
Allstate now offers a $10,000 medical deductible.
Talking to an Allstate insurance agent will make it sound like a No Fault deductible is a great thing that can save you money. Before I explain why this isn’t the case, I should note that one of the best ways to really save you money is to not talk to an Allstate agent at all. Allstate agents are “captive agents,” meaning they can only sell Allstate insurance, even when there might be another insurance company that can much better meet your needs and at a much lower price. That’s why as an insurance lawyer, I know the best way to save money on auto insurance is to talk with an independent insurance agent who can quote you the best price and coverages from many different auto lines. I also just don’t like Allstate, which keeps doing things that land them on my “Worst Insurance Companies” list.
Back to No Fault deductibles. At first it might sound like a good idea, because it will reduce the price of auto insurance for you. But it also causes huge problems for people who have the misfortune of getting hurt in an auto accident but who also have high deductibles on their No Fault medical.
For example, if someone has a $10,000 medical deductible on her car and a $5,000 medical deductible on her health insurance, she is going to be out-of-pocket $5,000, no matter what after an accident with serious injuries. If you do not have health insurance, you’re going to be on the hook for $10,000.
But if you’re seriously injured in any type of motor vehicle accident and even if you have health insurance, that number will likely be far more than the $5,000 medical deductible from the example above. In fact, from the example above, that number will likely be $15,000 before you’re said and done if it’s a bad car accident and you have serious personal injuries. There are so many co-pays, remainder balances and deductibles from your health insurance that you’ll still be out-of-pocket for thousands of dollars paying a No Fault deductible – even with health insurance. And that’s the best case scenario.
There are many other medical services that you might need that won’t be covered by your health insurance plan. These services, such as neuropsychological testing for a traumatic brain injury, chiropractic care or assisted active rehabilitative stretching for many plans for neck and back injuries, would also be billed to No Fault PIP and you will still have to pay that deductible first.
What our No Fault insurance lawyers recommend for your medical deductible
The one thing you want to avoid most is something coming between you and necessary medical care that you may need if you or a loved one in your family needs medical care and treatment after a bad automobile accident. Therefore, our attorneys strongly recommend that if you’re going to go with a medical deductible at all on your auto insurance, that it be as low as possible. You can still have savings on your auto insurance with a deductible of $500 or less.
The big problem with medical deductibles for No Fault (and the reason the Legislature did not allow high deductibles in the No Fault Act for all these years) is because the people who can least afford them will be the ones who try to get the biggest savings by electing the highest auto No Fault deductibles possible. Enter Allstate’s $10,000 medical deductible. Many people who may get seriously injured and who will desperately need it, won’t have the means to afford this deductible. But this deductible and the resulting savings, most appeals to these people.
There are unfortunately going to be car accidents. That’s one thing that we all know. The No Fault Act was passed in Michigan on the promise to quickly pay wage loss and other critical No Fault benefits, and most of all, to provide accident victims with important medical care and treatment.
These unlimited deductibles have, in my opinion, flipped the entire purpose behind Michigan’s auto No Fault insurance system on its head. Removing the previous restriction on high deductibles was a horrible decision by a Legislature that, in our age of unlimited campaign contributions by big insurance companies, has resulted in the politicians in Lansing giving the auto insurers another gift.
This deceptive, anti-consumer sky-high medical deductible has also likely secured another spot for Allstate on our attorneys’ list of the best and worst auto insurance companies for 2016.
Tomorrow I will continue this topic with a blog post on why it’s so important to choose primary No Fault (PIP) benefits.