Michigan Auto Insurance: Understanding The No-Fault System

Michigan is a No-Fault state for auto accidents, meaning that if you are injured in a car accident, your own auto insurance company will pay for your medical bills and lost wages, regardless of who caused the crash. This system was implemented in 1973 to ensure that car accident victims receive the help they need promptly and without having to sue the driver who caused the accident. Under Michigan's No-Fault law, all drivers are required to have certain mandatory insurance coverages, including Personal Injury Protection, Property Protection, and Residual Liability. Personal Injury Protection covers reasonable and necessary medical expenses, up to three years of lost wages, $20 a day for services you cannot perform, and benefits for dependents if you are killed. Property Protection covers damage to another person's property, up to $1,000,000, while Residual Liability provides protection if you are sued or found legally responsible for an accident involving death or serious injury.

Personal Injury Protection

The Michigan No-Fault Insurance law was implemented to ensure that car accident victims receive prompt assistance without regard to fault. Under this law, if a person is injured in a car accident, their own auto insurance company will pay for their medical bills and lost wages, rather than having to sue the driver who caused the accident. This system aims to prevent the financial burden and delays that victims may face in a tort liability system.

Prior to 2020, Michigan required drivers to have unlimited PIP coverage. However, recent changes in the law now allow drivers to choose from different coverage levels:

• $500,000 per person per accident
• $250,000 per person per accident
• $50,000 per person per accident (for drivers enrolled in Medicaid)
• Opt-out with no PIP coverage (for drivers on Medicare)

PIP covers various expenses, including medical services, surgical procedures, hospital expenses, and medication. It also covers lost wages for up to three years or until the person recovers and returns to work, with a monthly limit of $6,615 or 85% of their normal salary, whichever is smaller. Additionally, PIP provides up to $20 per day for replacement services, such as hiring someone to do laundry, clean the house, or shovel snow. In the unfortunate event of a policyholder's death in a car accident, PIP covers funeral and burial expenses of up to $5,000, and their dependents are entitled to work-loss benefits as well.

It is important to note that Michigan also requires drivers to have property protection insurance (PPI), which covers damage to other people's property, such as buildings or vehicles, caused by the insured's car.

Property Protection Insurance

PPI covers the "physical injury to or destruction of the property and loss of use of the property so injured or destroyed". For damaged or destroyed property, PPI insurance will pay for the "lesser of reasonable repair costs or replacement costs less depreciation". The coverage for the "loss of use" of a damaged vehicle has been interpreted to include the "value" or cost of a rental car.

PPI does not depend on fault and will cover damage to tangible property regardless of who was at fault in causing the damage. However, it is important to note that PPI only applies to incidents occurring within the state of Michigan. If an accident occurs outside of Michigan, your liability property damage coverage would apply.

The state of Michigan requires all drivers to carry $1,000,000 in PPI coverage as part of their car insurance policy. This is significantly higher than the required coverage levels in most other US states, contributing to the higher cost of insuring a vehicle in Michigan.

Residual Liability

The coverage provided by residual liability insurance includes:

• Pain and suffering compensation
• Excess medical benefits
• Lost wages
• Other economic damages that the at-fault driver owes to the injured party

The minimum coverage limits for residual liability insurance in Michigan are:

• $250,000 for one person's injury
• $500,000 for all persons injured in one accident
• $10,000 for property damage in another state

Drivers in Michigan have the option to purchase lower coverage limits of $50,000 for one person's injury and $100,000 for all persons injured in one accident. However, it is recommended that drivers carry higher coverage limits to fully protect themselves financially in the event of a serious accident.

If a driver is found legally responsible for damages that exceed their residual liability coverage limit, they will be required to pay the excess amount out of their own pocket. This could result in significant financial consequences, such as the seizure of assets or garnishment of wages.

It is important for drivers in Michigan to carefully consider their coverage limits and consult with insurance agents and legal and financial advisors to ensure they have adequate protection.

Uninsured Motorist Coverage

In Michigan, it is estimated that 21% of drivers do not have the no-fault insurance that is legally required. This means there is a significant chance of being involved in an accident with an uninsured driver, which can result in a lack of full compensation for injuries and damages. Uninsured motorist coverage fills this gap by allowing the injured party to seek compensation from their own insurance provider, who "steps into the shoes" of the uninsured driver and pays the claim. This coverage also applies in hit-and-run situations where the at-fault driver remains unidentified.

To file a successful UM coverage claim, the injured person must demonstrate that the other driver was uninsured and at fault for the accident. It is important to comply with the notification requirements and deadlines specified in the UM insurance policy, as insurance companies may deny coverage if notice is not provided within the specified timeframe. Additionally, some insurance companies require that a lawsuit be filed against the uninsured driver as a party in the claim.

The recommended UM coverage limits are at least $500,000 per person and $1,000,000 per accident. UM coverage is not intended to pay for medical bills but instead compensates for pain and suffering, injuries, and any excess economic loss or medical bills not covered by health insurance. It is important to note that UM coverage does not replace collision and comprehensive coverage, which cover physical damage to a vehicle.

In summary, uninsured motorist coverage is a crucial protection for Michigan drivers, given the significant number of uninsured drivers on the roads. It ensures that individuals and their families are properly protected in the event of a crash involving an uninsured driver or a hit-and-run incident.

Underinsured Motorist Coverage

UIM coverage is the only chance for car accident injury victims to recover the non-economic and economic damages they are entitled to after being injured by an underinsured driver. It is highly recommended that all drivers purchase UIM coverage, as any auto insurance policy sold in Michigan without it does not adequately protect the policyholder and their family.

UIM coverage works by having the policyholder's auto insurance company provide compensation and money damages that could have been recovered if the underinsured driver had adequate liability insurance coverage. In other words, the insurance company "steps into the shoes" of the underinsured driver and pays for all personal injury damages that the underinsured driver would have been responsible for.

To collect benefits under a UIM policy, an injured person must typically show that:

• The other driver was underinsured
• The underinsured driver was at fault for causing the accident
• The injured person has recovered damages equal to the full liability policy limits from the at-fault driver's insurance company, or that company has offered full policy limits to pay for the harm caused
• The insurance policy of the at-fault driver is inadequate and does not pay for all of the injured person's damages

UIM coverage is not mandatory in Michigan, but it is highly recommended as it offers vital protection at a low cost. For the price of a movie ticket and a box of popcorn, a driver can purchase UIM coverage with recommended limits of $500,000 per person and $1,000,000 per accident.

In summary, UIM coverage is a crucial form of protection for Michigan drivers, as it ensures they can receive fair compensation in the event of an accident with an underinsured driver. By purchasing UIM coverage, drivers can protect themselves and their families from the financial burden of insufficient insurance coverage.

Frequently asked questions