They call them accidents for a reason. No one intends for them to happen. When they do, the costs can be significant.
TrustedChoice.com reports that traffic accidents result in annual losses of $299.5 billion. If there are critical injuries, the costs can jump into the millions.
What No Fault Really Means
Twelve states, including Michigan, have enacted “No Fault” auto insurance laws. Michigan’s is among the most comprehensive, but the concept of no-fault insurance can be misleading.
“No Fault” does not mean that all damages resulting from an accident are automatically covered by your insurance. If you are involved in an accident in Michigan, No-Fault coverage works like this:
Personal Injury Protection (PIP)
Under Michigan law, a person injured in an accident is compensated by their insurance company. Family members riding in other vehicles are also covered. Up to 85% of lost income may also be paid for three years as well as a death benefit to families for three years.
Property Protection Insurance (PPI)
Michigan no-fault insurance provides $1 million in property damage coverage, including legally parked cars. It does not include cars that were operating and involved in the accident regardless of fault. This coverage applies only to property damage in Michigan and not in other states.
Basic Residual Liability Insurance
Residual liability coverage pays damages if you are at fault and sued in an accident. The minimum required coverage is:
- $20,000 to compensate a person injured or killed in an accident
- $40,000 total compensation per accident for multiple persons injured or killed
- $10,000 for property damage in another state
Under the statute, you can only sue, or be sued, if:
- Someone is seriously injured or killed
- A driver is not a Michigan resident and their vehicle is not registered in Michigan
- The accident occurred in another state.
What About My Car?
No-Fault does not address damage to your car resulting from an accident. Coverage to repair or replace your car in an accident is your responsibility.
If damages to your car exceed your coverage limits, or you have no insurance to repair your car, the cost to replace or repair your vehicle is paid by you. Remember, the residual liability coverage only pays for serious injuries and up to $10,000 in property damage in another state.
Michigan insurance companies offer coverage in addition to the basic no-fault coverage. Drivers who understand what “No Fault” really means, and what it doesn’t mean, know that the no-fault insurance statute is just the beginning to adequately insuring their vehicles.
Collision coverage pays for some or all of the damage to, or replacement of, your car in an accident. There are three types of collision insurance in Michigan:
- Broad Form – Pays for damages regardless of who caused the accident and with a deductible to pay only if you are at fault
- Standard – Pays for damages regardless of fault, but there is always a deductible
- Limited – Pays only if you are not at fault, and may have a deductible.
If your car is damaged by some event other than an accident, comprehensive coverage comes into play. Damage from storms, vandalism, break-ins and other non-driving events are generally covered under a policy’s comprehensive coverage
Underinsured and Uninsured Coverage
Statistics show that 21% of Michigan drivers are uninsured. Underinsured and uninsured motorist coverage help protect you in the event that you are in involved in an accident with an at-fault driver who has insufficient or no insurance to cover your injuries.
While your no-fault insurance will pay medical expenses and some disability loss, you may be required to sue the at-fault driver for additional damages like long-term care, disability, lost wages and pain and suffering. If the at-fault driver is not adequately insured, underinsured/uninsured coverage may pay the difference.
Even under Michigan’s no-fault statute, an auto accident can result in serious financial loss. Understanding the No-Fault insurance law and adequate coverage for all of your vehicles is your best protection.