Understanding how insurance works and the nuances specific to the state of Michigan can be crucial to a successful outcome for your claim
Few things in life are certain.
We’ve all lived through enough ups and downs to know that just when you thought something was a “sure thing,” it turns out that it wasn’t.
But car insurance is a sure thing.
If you own or drive a car in Michigan, you must have auto insurance.
Failing to purchase the correct amount of car insurance is against the law, and it will cost you in more ways than one if you’re in an accident as an uninsured driver.
First, whose responsibility is it to buy car insurance?
Who is required to purchase auto insurance?
In Michigan, car insurance follows the car. In other words, the owner of the car is responsible for the vehicle being insured. That would include property damage liability, along with optional collision and comprehensive coverage. Personal Injury Protection (PIP) follows the driver, which is different from liability coverage.
Usually, if your car is insured, the coverage extends to any person driving your car with permission. So if you permit your sister, friend, coworker, or any other properly licensed driver to use your vehicle and that person is involved in an accident, it would be handled by your insurance the same way as if you were driving the car yourself.
If you allow a friend to drive your car and they cause an accident, you could be held responsible for the damages. If the amount of damage is higher than your insurance policy limits, the plaintiff (the injured person) could sue you and your friend for additional damages that need to be paid out of pocket.
Types of Michigan car insurance policies
- Liability. Your Michigan liability insurance policy must include:
- Property damage, which covers damage you cause to another person’s vehicle or property.
- Bodily injury would cover expenses for physical injuries to other people.
- Property protection insurance. This coverage pays up to $1 million for damage to other people’s property or a parked vehicle.
- Personal injury protection (PIP). This covers your own medical expenses and a portion of your wage loss related to a car accident, along with injuries to other people like pedestrians or passengers.
PIP coverage includes the following:
- Your medical treatment costs resulting from the accident.
- Up to 85% of your lost wages for up to 3 years after the accident.
- Up to $20 per day for “replacement services,” which are things you might not be able to do for yourself because of your injuries, like house cleaning, child care, etc.
- You (the insured)
- Any family member who lives with you (even if the family member is injured while riding in someone else’s car or is injured as a pedestrian or bicyclist)
- Any passenger or pedestrian who doesn’t have their own no-fault policy and who’s injured in an accident with your car
- Any motorcyclist injured in an accident involving your car
Optional insurance coverage
There are some types of insurance that aren’t required by law, but they’re smart to have.
Will additional policies increase your premium?
Yes, a little. But not as much as you could be required to pay in damages out of pocket if you’re in an accident.
And, remember, your liability coverage is primarily to pay for someone else’s damages if you cause an accident, but it doesn’t cover damage to your own vehicle. So if you cause an accident and your vehicle is totaled, you have no way to pay for a new car (except out of pocket) unless you have one of the following optional coverages:
- Comprehensive. This insurance pays to repair your car if it’s damaged for a reason other than a collision. This includes theft, fire, vandalism, broken glass, damage from animals, or other instances.
- Collision. Just as it sounds, this insurance covers damage to your vehicle in a crash. You could opt for broad collision coverage, which would include any damage to your vehicle in a crash. If you are at fault, this insurance would cover the expense after your deductible. If you’re not at fault, insurance should cover your deductible, as well. There’s also limited collision coverage, which would only apply if you (or whoever is driving your car) are not at fault.
- Uninsured/underinsured motorist. If you’re in an accident with another driver who is uninsured or who doesn’t have enough insurance to cover the extent of your injuries, you can claim that amount on an uninsured/underinsured motorist policy if you have one.
Michigan is a no-fault insurance state
Each state is classified as either “at fault” or “no-fault”.
To distill this down to the basics, there are 2 questions to be determined if you’re in a Michigan car accident:
- Do you have a right to sue?
- Who pays for your damages?
|At fault (“Fault”) states||No-fault states (including Michigan)|
|The driver who causes an accident is responsible for paying for damages related to the accident. That person’s insurance company would pay those expenses up to the limit of their policy.
If the injured person does not accept the amount offered by the insurance company, or if the amount of damages exceeds the policy limits, they may file a lawsuit against the driver to recover damages that include medical expenses, lost wages, and non-economic damages like pain and suffering or other emotional distress.
|The purpose of a no-fault system is to reduce the cost of automotive insurance because it removes small claims from the court system.
Under this system, an insurance company would cover its own policyholder for their physical injuries regardless of who is at fault for the accident.
In some instances, this means that the victim does not need to prove that the other driver was at fault in order to be compensated for their injuries, which is called personal injury protection.
However, the victim may file a lawsuit for non-economic damages like pain and suffering.
2020 changes to Michigan no-fault insurance
The Michigan legislature passed several laws related to no-fault insurance and these changes went into effect on July 1, 2020.
PIP Choice: The new law allows a driver to choose whether to continue with unlimited PIP coverage, cap coverage at $50,000 if enrolled in Medicaid, or select a $250,000 or $500,0000 maximum.
The new PIP choice also allows for the Michigan Catastrophic Claims Association (MCCA) to pay medical costs for a victim who was catastrophically injured only if the person selected the unlimited coverage level on their policy. However, if a policy was issued before the new law went into effect on July 2, 2020, the MCCA would still cover that person’s catastrophic injury benefits regardless of coverage level if they are otherwise eligible.
Opt-out: If you’re on Medicare, you may choose not to have PIP medical benefits coverage. Instead, you’d turn to Medicare for medical coverage rather than your automotive policy.
Mini-tort: A mini-tort is a lawsuit that allows the victim in a car accident to claim some damages from the at-fault person’s insurance company, even in a no-fault system. Often, this is used to pay for damage repair costs or the victim’s collision coverage deductible. The maximum amount for a mini-tort increases from $1,000 to $3,000 under the new law.
Attendant care: An auto insurance policy is not obligated to cover more than 56 hours per week of in-home attendant care for a person injured in a car accident.
Qualified health coverage: In order to select certain coverage levels of PIP, you need separate qualified health insurance. That includes either Medicare or “health accident coverage” that includes coverage for car accident injuries. The deductible must be less than $6,000 per person.
Medicare-based fee schedule: Beginning on July 1, 2021, medical services provided following an accident would need to be charged based on a new Medicare-based fee schedule, which is a percentage of what Medicare covers.
Bodily injury liability coverage: A driver is required to carry a minimum of $250,000 in coverage for 1 person in 1 accident, and $500,000 for bodily injury or death of 2 people in 1 accident. However, you can choose a lower limit of $50,000 or $100,000.
Excess medical expenses: A victim of a Michigan car accident may sue the at-fault driver for payment of “excess” medical bills, or those that exceed their PIP medical benefits.
Michigan Assigned Claims Plan: Sometimes, a victim has no other source of insurance coverage — for example, a pedestrian or bicyclist or another person who doesn’t own an automobile. Under the Plan, a car insurance company would provide benefits to a victim without insurance for up to $250,000 in medical benefits.
How a victim can recover damages after a Michigan car accident
If you were injured in a Michigan car accident, there are several ways for you to claim damages, or recover costs.
You can now use your managed care (HMO) through your PIP medical benefits coverage. The 2020 Michigan laws now shift car accident medical costs onto your private health insurance and away from auto insurance companies. Medicaid is also a method for receiving benefits after PIP has been exhausted. You could also rely on Medicare to opt-out of PIP entirely.
Finally, you could file a lawsuit for your pain and suffering, along with other economic damage like lost wages or future earning capacity, ongoing medical treatment, and other expenses.
Penalties for failing to have required car insurance in Michigan
If you fail to maintain the required minimum insurance coverage, you could be fined between $200 and $500 and spend up to a year in jail.
Importantly, though, you would also be responsible for paying costs related to a car accident out of pocket.
When to call a Michigan car accident lawyer
Depending on the circumstances of your accident, it can be helpful to call a lawyer as soon as possible. Michigan insurance law is complicated, and the 2020 changes might be a challenge to navigate.
While it is the purpose of insurance to protect your assets in the event of a loss (whether it’s a car accident, a house fire, or any other damaging event that results in a loss of money), it’s also important to note that the insurance company isn’t always on your side. The insurance company makes a profit when it earns more money in premiums than it pays out in settlements.
It’s your lawyer’s job to work with the insurance company and the other parties to negotiate the best possible settlement for your needs. The right lawyer understands the law, knows the insurance companies, and is ready to work with the other parties to get the financial compensation you need after an accident.
And you don’t have to have a lawsuit in order to have a lawyer — your lawyer can also assist in your negotiations with the insurance company, even if you don’t intend to file a lawsuit.