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Who is Eligible for PIP – One of the Scariest Changes Created by No-Fault Auto Reform

By April 13, 2020May 15th, 2020No Fault Auto Reform, Personal Insurance

There’s a Big Shift in Who is Eligible for Personal Injury Protection (PIP) Benefits

Michigan’s Personal Injury Protection (PIP) is THE BEST coverage in the USA for expenses caused by auto accident injuries.  However, the new no-fault laws are creating situations where people who used to get unlimited PIP coverage won’t be eligible for PIP any longer.

For example:

  • You as a Michigan resident who doesn’t own an auto policy and doesn’t live with your parents, but you are driving someone else’s auto to work.
  • Your fiancé, who doesn’t have an auto policy of his own, is living with you and driving your auto.
  • Your dad who doesn’t live with you or have his own auto policy anymore and is in your auto with you.
  • Your child, who recently graduated from college, is no longer living with you but still drives your auto and is listed on your policy as a driver.
  • Your child’s friend, whose family’s auto policy canceled for non-payment, is riding in your auto with you.

In the above situations, you, your fiancé, your dad, your child, your child’s friend used to be eligible for Unlimited PIP benefits if they were injured in an auto accident.  The PIP benefits would’ve come from the auto policy covering the auto or the State of Michigan’s MACP Fund.  Not any more.  After no-fault auto reform you’d all be eligible for up to $250,000 in PIP benefits paid by the State of Michigan’s MACP fund.  $250,000 seems like a lot… until you’re in the intensive care unit.

How to Know Someone is Eligible for PIP Benefits on Your Auto Policy

The only way to know someone is eligible for PIP benefits from an auto policy is if their name appears on an auto policy as a “named insured”, or they’re married to someone who is a “named insured” or they are a resident relative of someone who is a “named insured”.  It’s a good idea to have both names of a married couple appear as named insureds on the auto policy.  Being listed as a “driver” doesn’t mean you’ll be eligible for PIP benefits.  “Resident relatives” aren’t documented on the auto policy – they’re determined at the time of the auto accident by the insurance company.

Who Qualifies as a Resident Relative or Family Member?

There are living arrangements where someone’s primary residence and relationship to a named insured are tough to pin down.  There’s no single flowchart followed by every insurance company to determine where someone resides and how “related” they are to a named insured they live with, but the below questions can be used to indicate if a conversation with your insurance agent is in order:

  • Where does the individual intend to have their domicile (permanent home) or household?
  • How formal of a relationship is there between the person and the named insured on the auto policy?
  • Does the person live in the same house or on the same premise as a named insured?
  • Is there another place of lodging that the person considers their residence or domicile (permanent home)?
  • What mailing address does the person use?
  • Where does the person keep their possessions?
  • What address does the person use on their driver’s license?
  • Does the person have an established room at the policyholder’s residence?
  • Is the person dependent on support from the policyholder?
  • Does the person have a room with belongings in it at the policyholder’s home?
  • Are the person’s parents divorced? How is custody arranged?  Where do they primarily live and which parent’s auto are they driving?

No single question of the above list trumps the others all the time – even the one about the drivers license.  If it is unclear where a person may be domiciled, or unclear about someone’s status a relative, it’s time to contact your auto insurance agent immediately!

Don’t wait until after an auto accident to understand how this works in your specific situation.

You can read more about resident relative here: The Importance of Understanding what “Resident Relative” Means

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