Auto Insurance Allocation: Where Does State Money Go?

Michigan is a no-fault state, meaning that when an accident happens, your own insurance pays for any hospital or medical expenses, wage losses, and funeral costs, regardless of who is responsible for the accident. In Michigan, auto insurance rates are higher than the national average, with drivers paying an average of $844 for minimum coverage and $2,976 for full coverage annually. Michigan's auto insurance rates are influenced by various factors, including the state's stringent coverage requirements, high proportion of uninsured drivers, and poor highway infrastructure. The state's insurance laws are designed to protect consumers and lower costs, but the impact of these factors contributes to higher insurance premiums for residents.

Personal Injury Protection (PIP)

PIP covers the medical expenses of both the policyholder and their passengers, even if they do not have health insurance. It also covers lost income, child care, and funeral expenses related to the accident. PIP policies have a minimum coverage amount and a per-person maximum coverage limit. The minimum coverage requirements are set by the state governments and can vary, while the maximums are set by insurance companies and are usually no more than $25,000.

In Michigan, drivers are required to purchase no-fault automobile insurance, which includes PIP. PIP pays all reasonable and necessary medical expenses for the lifetime of the insured if they are hurt in an auto accident, as well as wage loss and replacement services for up to three years after the date of the accident.

In New York, the basic No-Fault coverage limit is $50,000 per person, and it covers the driver and all passengers injured in the insured's car, as well as any pedestrians injured by the car. Under this coverage, the insurer also provides protection against economic losses arising from injuries sustained in motor vehicle accidents to all relatives residing in the household of the insured.

Property Protection Insurance (PPI)

PPI provides protection if you cause damage to properly parked vehicles or fixed properties such as buildings, lampposts, fences, or trees in the state of Michigan. It covers damage to other people's property and their properly parked vehicles. The minimum insurance limit for PPI is $1 million, and it is paid without regard to fault in an auto accident.

For instance, if you are waiting to make a left turn and another vehicle strikes you, pushing you into a telephone pole, both your insurance company and the insurance company of the wrongdoer will share equally in the cost to repair or replace the telephone pole.

PPI is different from property damage insurance, which covers your liability for vehicle damage repair costs resulting from an out-of-state car accident that you caused.

Residual Bodily Injury and Property Damage Liability (BI/PD)

Residual bodily injury refers to the long-lasting effects of a car accident on the patient. These effects continue to cause symptoms or limitations even after the initial injury has healed. Residual injuries are not necessarily a disability but can be a symptom you will feel after treatment, such as soreness in your joints due to a fracture.

• $20,000 per person who is hurt or killed in an accident
• $40,000 for each accident if several people are hurt or killed
• Up to $10,000 for damage your vehicle does to property in another state

These minimum limits are often referred to as 20/40/10.

You can purchase higher limits of BI/PD coverage. This is important as accident-related medical bills can quickly exceed your state's minimum required amount. To protect your finances more fully, consider choosing a BI liability coverage limit equal to or more than your net worth.

Collision and Comprehensive Insurance

Collision Insurance

Collision insurance covers repairs to your car when it is damaged in a crash. There are three basic types of collision insurance: limited, standard, and broad form.

With broad form collision insurance, the deductible is waived if the driver of the insured vehicle was "not substantially at fault" for the accident. In contrast, under standard collision insurance, the deductible must be paid even if the driver was not at fault.

Comprehensive Insurance

Comprehensive insurance covers the cost of repairs if your car is hit by a falling object, collides with an animal, or is damaged in a fire, flood, or by vandals. It also covers the cost of replacing your car if it is stolen.

If you have an older car, you may not want collision and comprehensive insurance. However, if your car is financed, the loan company may require you to buy this coverage.

Limited Property Damage Liability Insurance

Property Damage Liability Insurance is a type of car insurance coverage that pays for damage you cause to another person's property, such as their car or home, as a result of an accident. It is important to note that property damage liability insurance never covers damage to the policyholder's own vehicle or property. Instead, the policyholder would need collision or comprehensive coverage to cover their own vehicle repairs.

Property damage liability insurance is typically part of your vehicle insurance policy's liability coverage. It covers damage to other people's vehicles or property, while collision insurance covers damage to your vehicle no matter who is at fault in the accident. Nearly every state requires drivers to carry some level of property damage liability insurance.

The cost of property damage liability insurance depends on how much you purchase. The higher your limits are, the more expensive your coverage will be. It is recommended that you buy the maximum amount of property damage coverage that you can afford to protect your assets in case you are sued after an accident.

Frequently asked questions